Q. Does the state of New Jersey allow withdrawals from 529 plan to pay for K-12 private school?
A. Yes, you can.
In 1996, the U.S. government created Section 529 plans, named for the tax code that governs how the plans work.
Traditionally, 529 plans have been used to save for qualifying higher education expenses, said Evan Drury, a financial advisor with U.S. Financial Services in Fairfield.
Qualifying expenses may include tuition and fees, room and board (provided the amount doesn’t exceed the amount charged for housing by the institution or the federal aid calculated allowance for room and board), textbooks, computers and related equipment.
You should save your receipts and make sure that qualified items are purchased separately from non-qualified items, Drury said.
Under 2018 tax law, the federal law was adjusted to include K-12 tuition expenses, he said.
“In 2018, you now have the ability to withdraw $10,000 per student per year for K-12 private school education,” Drury said.
He said while 529 distributions can be used for qualifying higher education expenses as indicated above, a distribution for K-12 expenses can only be used for tuition expenses.
Educational summer camps and other activities would not be considered a qualified expense, he said.
Neither would college prep classes.
While the government created 529 plans, the states administer them.
“The federal law is clear, however not all states have adjusted their rules to correspond with this new law,” Drury said. “In New Jersey, the state does allow qualified distributions for K-12 private school tuition in accordance with federal law.”
Before considering a withdrawal from your 529 plan for K-12 private education, Drury recommends you examine any distribution with your advisor to determine how it might impact your college savings goals.
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