529 Federal Tax Updates:
SECURE Act: On December 20, 2019, the SECURE Act (Setting Every Community Up for Retirement Enhancement) was signed into law. This Act allows 529 Plan account owners to withdraw assets to pay for certain apprenticeship programs and to pay principal and interest on qualified higher education loans for the beneficiary or any of the beneficiary’s siblings. The loan repayment provisions apply to repayments up to a lifetime maximum of $10,000 per individual. As with any change to law, we encourage account owners to consult a qualified tax advisor regarding the application of federal and state tax laws to their particular situation.
If you have questions about the 529 programs managed by College Savings Bank, you can reach a Client Service Representative by phone at 800-888-2723, Monday through Friday from 9 a.m. to 6 p.m. Eastern Time.
Arizona Taxpayers: On December 22, 2017, the federal tax reform bill H.R. 1 was signed into law. Sections of this new law made changes to existing 529 internal revenue code which now permits withdrawals from a 529 college savings account up to $10,000 each year, per beneficiary, for tuition expenses in connection with enrollment and attendance at an elementary or secondary public, private or religious school (“K-12 tuition”). While we wait for the Arizona Department of Revenue and the Arizona State Legislature to respond to the new U.S. tax law, please note the following:
Arizona taxpayers should consult their tax advisors before making a withdrawal for K-12 tuition and/or before making a contribution which they intend to ultimately withdraw for K-12 tuition. It will require action by the Arizona State Legislature to extend favorable Arizona state tax treatment to withdrawals for K-12 tuition taken from an Arizona Family College Savings (529) Plan account.
Account owners can withdraw assets to pay K-12 tuition and treat the withdrawals as qualified expenses for federal tax purposes.
Funds in 529 Plan accounts can be rolled over to ABLE Plan accounts without federal tax consequences, up to the annual $15,000 contribution limit. It may require action by the Arizona State Legislature to extend favorable Arizona state tax treatment to rollovers from an Arizona 529 Plan account to an ABLE Plan account.
The Commission will provide more information as additional details are released regarding how Arizona state tax law will conform to the new federal tax law. In the meantime, we encourage AZ 529 investors to consult a qualified tax advisor regarding their personal circumstances.
Montana Taxpayers: Updates on Tax Reform, SECURE Act, Montana Taxation of Distributions for K-12 Tuition, Apprenticeship Program Expenses, and Education Loan Repayments > Learn More <
NexBank and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.