# Republican Tax Bill: 529 Savings Accounts Expand to K-12 **URL:** \ **Category:** In My Humble Opinion\ **Created:** [January 8, 2018, 11:52pm UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169 "2018-01-08T23:52:17Z")\ **Posts on this page:** 15\ **Page:** 1
**Author:** ![snowthx](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/snowthx/32/10660_2.png) [@snowthx](https://boards.straightdope.com/u/snowthx)\ **Post date:** [January 8, 2018, 11:52pm UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/1 "2018-01-08T23:52:17Z")
[Article here](https://www.npr.org/sections/ed/2018/01/08/575167214/congress-changed-529-college-savings-plans-and-now-states-are-nervous). _After Congress’ rewrite of the tax code, parents can now use 529 plans to cover tuition not only at colleges and universities, but also at private elementary and high schools._ Looks like a Ted Cruz poke at public schools - I think that is something he has been wanting for a while. ISTM this will have some impacts: - As the article states - will impact some state income tax revenues. - Will encourage private schools, and probably religious schools as well. - Will only benefit people with the means to contribute to 529 plans (aka: the Rich). - Does not seem to impact people who are already using these accounts to fund college. Other opinions? ---
**Author:** ![thelurkinghorror](https://avatars.discourse-cdn.com/v4/letter/t/7c8e57/32.png) [@thelurkinghorror](https://boards.straightdope.com/u/thelurkinghorror)\ **Post date:** [January 9, 2018, 1:03am UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/2 "2018-01-09T01:03:56Z")
I will remain agnostic about this, I could see some benefits and disadvantages. Your third point seems like begging the question though. Public schools don’t cost money, and therefore it only goes to private schools, and rich people go to private schools, so therefore it benefits the rich. I had some 529 money, both contributed and the result of a scholarship and hardly rich. Of course rich people are probably more likely to be aware of these plans, as in my experience “normal” people don’t even know what a 529 is. It does require some management or planning like an HSA/FSA, which aren’t for rich people. Looks like the majority of states (~80% of those that have income tax) provide a credit for contributing. I’m not sure if that’s benefiting anyone who is poor. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 9, 2018, 2:42am UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/3 "2018-01-09T02:42:02Z")
> [@snowthx](#): > > - Will only benefit people with the means to contribute to 529 plans (aka: the Rich). Anyone who spends less than they make has the means to contribute to 529 plans. So unless you have a very special and personal meaning of “the Rich”, you are incorrect. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [January 9, 2018, 3:11am UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/4 "2018-01-09T03:11:11Z")
> [@Ruken](#): > > Anyone who spends less than they make has the means to contribute to 529 plans. So unless you have a very special and personal meaning of “the Rich”, you are incorrect. The data in this [link](https://www.brookings.edu/research/a-tax-break-for-dream-hoarders-what-to-do-about-529-college-savings-plans/) leads me to think otherwise. > [@Brookings Institution](#): > > Who reaps the benefits of these tax breaks? The main beneficiaries are upper-middle-class families. The Government Accountability Office (GAO) found that in 2010, 47 percent of families with 529 plans had an annual income of over $150,000. (Note that only 11 percent of families with children made more than $150,000 that year.)[4] The tax benefits associated with 529 plans also skew towards higher-income families, according to the GAO. The median tax savings for families making up to $100,000 was $561, compared to $1,958 for families making between $100,001 and $150,000, and $3,132 for families with incomes over $150,000. ---
**Author:** ![sleestak](https://avatars.discourse-cdn.com/v4/letter/s/919ad9/32.png) [@sleestak](https://boards.straightdope.com/u/sleestak)\ **Post date:** [January 9, 2018, 3:45am UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/5 "2018-01-09T03:45:24Z")
> [@snowthx](#): > > [Article here](https://www.npr.org/sections/ed/2018/01/08/575167214/congress-changed-529-college-savings-plans-and-now-states-are-nervous). > > _After Congress’ rewrite of the tax code, parents can now use 529 plans to cover tuition not only at colleges and universities, but also at private elementary and high schools._ > > Looks like a Ted Cruz poke at public schools - I think that is something he has been wanting for a while. ISTM this will have some impacts: > > - As the article states - will impact some state income tax revenues. > - Will encourage private schools, and probably religious schools as well. > - Will only benefit people with the means to contribute to 529 plans (aka: the Rich). > - Does not seem to impact people who are already using these accounts to fund college. > > Other opinions? I am far from rich and have 529s set up for my two year old twins. It isn’t about being rich, it is about learning what tools are available to give your kids the best options you can. Considering that googling on college saving plan gives a wealth of information, the cost is as low as 25 bucks a paycheck and the money isn’t taxed when it is withdrawn, painting this as some program that only benefits the rich is sorta silly. Slee ---
**Author:** ![thelurkinghorror](https://avatars.discourse-cdn.com/v4/letter/t/7c8e57/32.png) [@thelurkinghorror](https://boards.straightdope.com/u/thelurkinghorror)\ **Post date:** [January 9, 2018, 3:55am UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/6 "2018-01-09T03:55:40Z")
> [@jasg](#): > > The data in this [link](https://www.brookings.edu/research/a-tax-break-for-dream-hoarders-what-to-do-about-529-college-savings-plans/) leads me to think otherwise. Right, but that’s like saying that lowering North Dakota’s taxes benefits white Lutherans more than other groups. Might be true but it’s due to a non-representative sample. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 9, 2018, 12:01pm UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/7 "2018-01-09T12:01:25Z")
> [@jasg](#): > > The data in this [link](https://www.brookings.edu/research/a-tax-break-for-dream-hoarders-what-to-do-about-529-college-savings-plans/) leads me to think otherwise. “Main” is not “only”. The statement in the OP is false. This bill has enough wrong with it that we don’t need to make things up to criticize it. ---
**Author:** ![Munch](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/munch/32/5281_2.png) [@Munch](https://boards.straightdope.com/u/Munch)\ **Post date:** [January 9, 2018, 2:30pm UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/8 "2018-01-09T14:30:59Z")
I think it’s pretty odd that the author of that article didn’t mention Coverdell savings accounts once, or UTMAs - both of which can be used to fund K-12 expenses (the former doing so far more effectively than the latter). I suspect that But also missing is the fact that there isn’t a whole lot of time to reap significant tax savings if you’re using it to fund elementary education, since the big tax break is only on the growth that the fund sees (since you’ve already paid taxes on the basis)\*. \*Yes - the incentive that most states have in place is usually a tax deduction for contributions, or if you’re lucky, a tax credit (like here in Indiana). But in those instances, you benefit from making contributions every year - not by making a big lump contribution up front (since there’s (I think) a hard cap on the deduction/credit in every state). > [@thelurkinghorror](#): > > Looks like the majority of states (~80% of those that have income tax) provide a credit for contributing. I’m not sure if that’s benefiting anyone who is poor. Nitpick: only 3 states offer a tax credit for contributing: Indiana, Utah and Vermont. The other 32 states (and DC) that have a benefit offer a tax deduction. It’s not a huge distinction, but it’s important, especially here in Indiana (20% tax credit on first $5000 contributed - for a $1000 tax credit). For us, our $5000 contribution takes $1000 off our state income tax bill. If it was just a deduction, we’d only be saving $165 (on Indiana’s 3.3% income tax rate). ---
**Author:** ![kopek](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kopek/32/337_2.png) [@kopek](https://boards.straightdope.com/u/kopek)\ **Post date:** [January 9, 2018, 3:54pm UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/9 "2018-01-09T15:54:25Z")
I am neutral on the change overall. > [@snowthx](#): > > - Will encourage private schools, and probably religious schools as well. That one I don’t see happening much; there being much impact. Compared to say 50 years back the number of religious and private brick-and-mortar schools has shrunk so far as to be almost meaningless in most regions I am aware of. More these days it looks to be home-school or cyber-charter schools. From what I’ve read I don’t see this being expanded to those at this point although I must admit that some of the language could be stretched to that point. ---
**Author:** ![HurricaneDitka](https://avatars.discourse-cdn.com/v4/letter/h/96bed5/32.png) [@HurricaneDitka](https://boards.straightdope.com/u/HurricaneDitka)\ **Post date:** [January 9, 2018, 5:25pm UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/10 "2018-01-09T17:25:07Z")
> [@Munch](#): > > I think it’s pretty odd that the author of that article didn’t mention Coverdell savings accounts once, or UTMAs - both of which can be used to fund K-12 expenses (the former doing so far more effectively than the latter). I suspect that But also missing is the fact that there isn’t a whole lot of time to reap significant tax savings if you’re using it to fund elementary education, since the big tax break is only on the growth that the fund sees (since you’ve already paid taxes on the basis)\*. > > \*Yes - the incentive that most states have in place is usually a tax deduction for contributions, or if you’re lucky, a tax credit (like here in Indiana). But in those instances, you benefit from making contributions every year - not by making a big lump contribution up front (since there’s (I think) a hard cap on the deduction/credit in every state). > Nitpick: only 3 states offer a tax credit for contributing: Indiana, Utah and Vermont. The other 32 states (and DC) that have a benefit offer a tax deduction. It’s not a huge distinction, but it’s important, especially here in Indiana (20% tax credit on first $5000 contributed - for a $1000 tax credit). For us, our $5000 contribution takes $1000 off our state income tax bill. If it was just a deduction, we’d only be saving $165 (on Indiana’s 3.3% income tax rate). You sound knowledgeable on the subject. I live in Utah. My wife and I are expecting our first child in March. I’ve been trying to figure out if I want to do an ESA or a 529 plan or something else. What would be best? 529? ---
**Author:** ![ftg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ftg/32/2801_2.png) [@ftg](https://boards.straightdope.com/u/ftg)\ **Post date:** [January 9, 2018, 6:04pm UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/11 "2018-01-09T18:04:27Z")
Segregation academies are very popular in the South. Religiously oriented private schools everywhere. Some politicians have made various efforts to assist them. School vouchers for example. This is just another gambit in this arena. ---
**Author:** ![thelurkinghorror](https://avatars.discourse-cdn.com/v4/letter/t/7c8e57/32.png) [@thelurkinghorror](https://boards.straightdope.com/u/thelurkinghorror)\ **Post date:** [January 9, 2018, 8:33pm UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/12 "2018-01-09T20:33:06Z")
Oh yeah, I forgot about Coverdells. Those are already applicable to K-12, and I don’t see any complaints. **HurricaneDitka** there’s no right answer, but a popular solution is to put the max into Coverdell ($2000/year) and any additional into 529. The other difference is that ESAs can be managed and invested as you see fit. But I think this is all moot, the tax plan removed Coverdell in favor of 529 last I checked. Existing accounts are unaffected. So unless that changes 529 is your option. ---
**Author:** ![HurricaneDitka](https://avatars.discourse-cdn.com/v4/letter/h/96bed5/32.png) [@HurricaneDitka](https://boards.straightdope.com/u/HurricaneDitka)\ **Post date:** [January 9, 2018, 8:35pm UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/13 "2018-01-09T20:35:33Z")
> [@thelurkinghorror](#): > > … But I think this is all moot, the tax plan removed Coverdell in favor of 529 last I checked. Existing accounts are unaffected. So unless that changes 529 is your option. Thanks, I did not know this. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [January 9, 2018, 9:55pm UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/14 "2018-01-09T21:55:40Z")
> [@ftg](#): > > Segregation academies are very popular in the South. Religiously oriented private schools everywhere. Some politicians have made various efforts to assist them. School vouchers for example. Generally speaking, schools with explicitly discriminatory policies are barred from receiving state voucher funds. The segregation effect is more the result of white people being [more likely to participate](https://www.theatlantic.com/education/archive/2017/03/do-private-school-vouchers-promote-segregation/520392/) in voucher programs. ---
**Author:** ![snowthx](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/snowthx/32/10660_2.png) [@snowthx](https://boards.straightdope.com/u/snowthx)\ **Post date:** [January 9, 2018, 10:29pm UTC](https://boards.straightdope.com/t/republican-tax-bill-529-savings-accounts-expand-to-k-12/806169/15 "2018-01-09T22:29:31Z")
Good point about the Coverdells. I think taking that into account, the calculus does not change dramatically, WRT this being primarily a benefit for the well-off. Seems like the rules have changed slightly, but the landscape remains. If things are not changed much, then what was behind the change? Nothing happens for no reason in government - so what promise did Cruz make to whom, and what is the upside for them?