If Republicans are able to advance their tax reforms, one particular change could benefit FRCS families, and all families who want to either enroll their children in a private school or homeschool. This change specifically affects the 529 Savings Plans that are currently available to parents who are saving money for college tuition. In both the House and Senate versions of the Bill, there is allowance for parents to utilize funds in 529 Plans up to $10,000 per year for education from kindergarten through 12th grade.
529 savings plan contributions are made after taxes, but the money in the accounts, including interest earned, is non-taxable when withdrawn to pay for college. Parents can set up accounts when their children are born and make contributions to the account throughout their child’s academic career. While some states already provide access to 529 accounts for private primary and secondary education (e.g., Arizona), this new tax law would open this possibility to everyone.
This is exciting news for FRCS parents who have or have been considering a 529 plan for their children! It will be interesting to see what unfolds as this Tax Bill continues to develop in Congress.
This information is presented to families without recommendation or suggestion. FRCS does not offer financial advice and presents this data merely as a service to families. Families should do their own due diligence when making financial decisions regarding investments and savings plans, consulting their tax and financial advisors as appropriate.
Update (December 14, 2017)
We received an email from ACSI (the Association of Christian Schools International) with some additional information about how the tax bill could impact FRCS, especially its teachers and staff. Please read the following excerpt from that email, and act however you feel led.
The U.S. Senate passed its version of the Tax Cuts and Jobs Act in the early hours of Saturday morning, December 2. The House passed its bill November 16. The two chambers must reconcile their bills in conference committee, a process that begins this week. We want to notify all of our legislators to urge the conference committee to keep the following four provisions in the final bill:
- The final bill should retain the Senate’s expansion of 529 Savings Accounts. Both the House and Senate now allow savings for elementary and secondary school expenses in 529 Savings Accounts, though the Senate’s language is broader. Expansion of 529 accounts will help parents save for their children’s education during their K–12 years as well as for college.
- The final bill should preserve Sec. 117(d) as provided in the Senate bill. This section of the Internal Revenue Code allows schools to provide tax-free tuition to the children of teachers and other staff. This is an important benefit for teachers who often already make sacrifices for the greater good. The benefit also helps schools recruit quality staff. Regrettably, the House version taxes this benefit as income. Christian high school tuition averages $9,000 per child. If the House prevails, a teacher who receives the benefit will be taxed on $9,000 of additional income per child and the school will face additional employer payroll taxes for every teacher/staff member who receives the benefit.
- The final bill should retain Sec. 127(a) as provided in the Senate bill.This section allows schools to provide employees up to $5,250 per year tax-free in educational assistance. This is a valuable tool for schools to recruit high-quality teaching and other staff. If the House version prevails, this benefit will be taxable as income.
- The final bill should preserve the Senate version’s doubling of the teacher deduction for classroom expenses to $500. Doubling the deduction will be a great help to educators. The House bill eliminates the current $250 deduction for teacher classroom expenses altogether.
Quick Action Steps: Please contact your legislators and urge them to protect Christian schools and teachers in the tax reform bill.