By Lynn Fitch
New Tax Benefits to Help You Pay for
Your Child’s K12 Tuition
Good news! A little-noticed provision in the Tax Cuts and Jobs Act signed by President Trump in December can help you stretch your dollar a little further when you pay for your child’s Christian education, starting as early as when they start pre-kindergarten.
The provision allows you to take advantage of the tax benefits that come with traditional 529 college savings plans to help you save for tuition at private, public, and religious elementary and secondary schools. In Mississippi, that means you can now save through the Mississippi Affordable College Savings (MACS) program and get the same state and federal tax deductions you could always get when you used MACS to help pay for your child’s higher education.
Specifically, the interest you earn on your MACS savings may be exempt from federal and state income tax. Plus, contributions to your MACS account may be deductible from Mississippi income tax, up to $10,000 for a single filer and up to $20,000 for joint filers. MACS plans may even qualify for federal gift tax advantages. These benefits all add up to more bang for your savings buck!
Under the new federal tax law, you can use up to $10,000 per calendar year to pay for your child’s tuition at a religious or private elementary or secondary school and enjoy. That $10,000 cap is per child. So, if you have two children in school, you can open two accounts, one for each child, and pay up to $10,000 out of each account per year.
Often grandparents and other loved ones will also open up accounts. What could be better than giving the gift of education and a brighter future? Just remember that the $10,000 cap applies to the child, not the account. So, even if there are two accounts, both with your child as a beneficiary, the total withdrawal in a calendar year for elementary or secondary school tuition cannot exceed $10,000 without potentially incurring tax penalties.
This new benefit only applies to tuition. You cannot use it to pay for extracurricular activities, fees, books, housing, or other costs associated with going to a religious or private elementary or secondary school. You also cannot use it for homeschooling expenses.
If the elementary school offers a pre-kindergarten education, that tuition qualifies as a tax-advantaged expense. However, stand-alone pre-K and kindergarten programs, not offered through an eligible elementary or secondary school, do not qualify under the new law.
The $10,000 cap does not apply once your child has graduated and headed off to college. Then, MACS can be used with no dollar limit to pay tuition, fees, qualified room and board expenses, book costs, and even laptops and technology. And, MACS can be used at any qualified institution of higher learning, four-year or two-year; public, private, or religious; in-state or out-of-state.
College Savings Mississippi, the division of my office which runs MACS and Mississippi’s other college savings program, MPACT (Mississippi Prepaid Affordable College Tuition), makes opening an account, contributing to it, making payments, and even setting up private gift-giving opportunities easy and convenient. In fact, you can do it all only through my website, www.treasurerlynnfitch.com.
We also work with employers to help them offer MACS and MPACT to their employees through payroll deposit. In fact, more than 150 Mississippi employers all across the State now give their employees the option of saving for their children’s education this way. It is easy to set up for businesses of any size and costs your company nothing to provide. Employee benefits like this are a great way to attract quality staff and retain them.
And, with payroll deposit, your employees can save for as little as $15 per paycheck. So you are helping them put that money away for their children’s education instead of spending it at Starbucks. As Corinthians reminds us, “he who sows sparingly will also reap sparingly, and he who sows bountifully will also reap bountifully.” (2 Corinthians 9:6)
We used to say that when it comes to saving for college, MPACT and MACS are the way to go. But, now MACS can do so much for, helping you pay for your child’s education, from start to finish!
Lynn Fitch is Treasurer for the State of Mississippi and Chair for the Board of College Savings Mississippi. To learn more about MACS and MPACT, to set up an account, or to manage an existing account, visit www.treasurerlynnfitch.com or call 1-800-987-4450.