The Internal Revenue Service and Treasury Department said Monday they plan to issue regulations on tax law changes affecting 529 plans related to tuition refunds, K-12 education and rollovers to an ABLE account for disability-related expenses.
Notice 2018-58 addresses a change included in the 2015 Protecting Americans From Tax Hikes (PATH) Act, and two changes included in the 2017 tax overhaul.
Taxpayers, beneficiaries and administrators of 529 and Achieving a Better Life Experience (ABLE) programs can rely on the rules described in the Notice until Treasury and IRS issue regulations clarifying the three changes.
Future regulations will simplify the tax treatment of a special rule added under the PATH Act for a beneficiary of a 529 plan, usually a student, who receives a refund of tuition or other qualified education expenses. “This can occur when a student drops a class mid-semester,” IRS and Treasury explain. “If the beneficiary recontributes the refund to any of his or her 529 plans within 60 days, the refund is tax-free.”