Soaring
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This & That
Cordell’s Corner: FAQs About 529 Plans for K-12 Students This topic may look familiar, since we presented this information originally in 2018. Many of you are new to SCA, so we wanted to make sure you were aware of this beneficial tax-saving opportunity. It is also a reminder for you long-term SCA families to consider taking advantage of these 529 Plans as well, if you haven’t already done so. What are 529 Plans? They are special tax-advantaged investment accounts, originally designed to help families pay for college expenses. But, recently amended legislation now allows parents to use these plans to pay educational expenses at K-12 public, private, or religious schools as well.
How can I set up a 529 Plan and what does it cost? Plans can be set up with any investment broker or directly with the State of Missouri (MOST 529 Plans) or the State of Kansas (Learning Quest 529 Plans). There are no fees for setting Cordell Dick Director of Major Gifts up state-sponsored MOST or Learning Quest 529 Plans; however, your financial advisor may charge a small fee to do so.
Are contributions into 529 Plans tax deductible? Yes, for state income tax purposes; however, each state has its own limits. In the State of Missouri, a state income tax deduction is available for annual contributions to 529 Plans of up to $16,000 for married couples filing jointly or $8,000 for single taxpayers. In Kansas, the state income tax deduction is available for up to $6,000 per plan for married couples filing jointly or $3,000 per plan for single taxpayers.
How long do funds need to be held in a 529 Plan before they can be withdr awn? The legislation did not require a minimum time period for the funds to be held in a 529 Plan account before they can be withdrawn. Therefore, a family may withdraw funds that are needed to pay for qualifying educational expenses soon after the date of deposit without jeopardizing the income tax benefits of the plan.
Is the income or earnings that accumulate inside 529 Plans taxable? No, income and earnings that accumulate inside 529 Plans are not taxable for either federal or state income tax purposes.
Will my 529 Plan(s) change my SCA FACTS account? No. Your FACTS tuition payment plan will remain in effect. You will be responsible for submitting reimbursement requests to your 529 Plan administrator for withdrawing qualified educational expenses. The 529 Plan should reimburse your personal account directly.
Are withdr awals from 529 Plans taxable? No, withdrawals for qualified educational purposes are not taxable if the withdrawals do not exceed $10,000 per year for each 529 Plan for K-12 students. There are penalties for excess withdrawals or for paying for nonqualifying expenses.
To learn more about 529 Plans go to the https:// www.missourimost.org/ for Missouri and https://www. kansasstatetreasurer.com/assets/files/education_ savings_FAQs.pdf for Kansas residents. If you have any other questions about 529 Plans or making a gift to Summit Christian Academy, please give me a call at 816525-1480, Ext. 421 or email me at cordelld@sca-kc.org.
