What is the Most Tax Advantageous Way to Pay for Private School?
Hollis, NH Resident Seeks Advice
There are many tax benefits to a 529 plan to save for a child’s college. Money in this account can now be used to pay for private elementary and high school education expenses as well. This plan can save parents plenty as the money invested and withdrawals are tax-free when used for qualified education expenses. Up to $10,000 can be withdrawn from the 529 annually to pay for private elementary or secondary school.
A Hollis resident was enrolling her daughter in a private high school. Looking for the most tax-advantageous way to pay for her daughter’s education, she contacted the experts at Merrimack Tax Associates.
Utilize a 529 Plan to Pay for Private Elementary and High School
A great investment for a parent to make in their child’s education savings is a 529. These plans offer plenty of tax breaks, as the earnings grow in the account tax-free. When used for qualified education expenses, the withdrawals are also tax-free. These savings can now be used to pay for private elementary and high school, with a limit of $10,000 in withdrawals each year. When used for elementary and high school education, the money can only be used toward tuition. Additional expenses for supplies, books, and computer equipment do not qualify.
Grandparents Can Use the Education Exemption for Money Gifts
Regularly an individual can only gift $15,000 per year to each grandchild, without being hit with the gift tax. Anything over this dollar amount qualifies for the lifetime exemption gift and estate taxes, which is currently just set at $11.4 million. However, this limit does not apply for a grandparent paying the money directly to school to cover the child’s tuition. This education exemption applies to not only college, but private elementary and high school as well.
The Hollis resident was pleased to hear that she had options available and plans to utilize her child’s 529 plan to offset the annual expenses of a private high school.
Set up an appointment with Merrimack Tax Associates’ professionals to find out more about 529 plans. Call today (603) 429-2009.