As of July 14, Kentucky will join the states allowing parents to use funds saved in a 529 savings plan to pay for K-12 tuition.
Kentucky lawmakers amended house bill 434 to conform with the new tax law, which allows for expanded use of 529 account funds.
The new law will allow parents to withdraw up to $10,000 per year from a Kentucky Education Savings Plan Trust (KESPT) account, the state’s 529 savings plan, to pay tuition at an elementary or secondary public, private or religious school.
Tuition is defined as the quarterly or semester charges imposed to attend an educational institution and required as a condition of enrollment.
“We encourage families to start saving for educational cost while their children are young, and timing is certainly a factor if a family is saving for K-12 tuition,” said David Lawhorn, KESPT program manager, in a statement. “KESPT offers many advantages for Kentucky residents, and this new law gives families an opportunity to leverage those benefits for many years.”
Parents also have the option of using KESPT’s eGifting feature to invite grandparents, family and friends to make gifts to a KESPT account for maximum growth potential.
As it stands now, 32 states consider K-12 a qualified 529 plan expense — with Alabama and Kentucky being the latest ones to jump on board, bringing the number to 34.
The new tax law expanded the qualified expenses associated with a 529 college savings plan.
Louisiana has set up a separate program for K-12 savings, the Louisiana Student Tuition Assistance and Revenue Trust Kindergarten Through Grade Twelve Program, or START K12.
Account owners can use a START K12 account to save for K-12 expenses at public or private elementary or secondary schools in Louisiana, with withdrawals being limited to $10,000 per tax year, per beneficiary.
“START account owners who had an account as of Dec. 31, 2017, are allowed to withdraw up to $10,000 from their START accounts during 2018 to pay tuition expenses related to kindergarten through twelve grade of the beneficiary of the existing account,” according to a savingforcollege.com spokesperson.
Disbursements may not be more than what was in the account as of Dec. 31, 2017, and they may not exceed the current account balance.
“While Louisiana does offer a tax deduction for 529 contributions, contributions to START K12 accounts are not deductible in computing Louisiana taxable income,” the savingforcollege.com spokesperson said.