A tax-deferred 529 savings plan is a great way to save money for higher education. In the 2020 tax year, a few recent changes made by Congress could make those plans work even harder for more taxpayers.
New Changes to 529 Plans
For many people, college or graduate school can be an important step in their education toward their future career. And a 529 plan can be an equally important part of their strategy in paying for it. It’s not cheap, after all.
But not everyone may be interested in going to college or graduate school. And that’s okay. Fortunately, Congress recognized that and changed the rules to make the plans more flexible, beginning now. They now include two additional provisions specifying how the money can be spent, without incurring taxes.
Apprenticeship Programs are Now 529-Eligible
From construction to healthcare, these programs are a great way for high school graduates to get practical, hands-on experience in the field of their choice. Beginning in 2019, taxpayers can use the funds from a 529 plan tax-free to pay for their apprenticeship program, helping ambitious hard-working young people get ahead with the specialized training they need to get a good career.
529 Savings Can Now be Applied Toward Student Loans
If you’ve been looking for a way to pay off student loans, you’re in luck. Beginning in 2019, taxpayers can now use up to $10,000 from a 529 plan to pay student loans for siblings or the beneficiary. That can really help students get on a solid financial footing after graduation.
These changes may seem modest, but they could go a long way toward helping individual taxpayers pay for education costs in a way that makes the most sense for them. And by making sure everyone gets the education they want, we all benefit.
And what could be smarter than that?