What the new tax law means for your college savings plan

Your trusty college savings plan is no longer just for higher-education costs, thanks to the new tax law.

Whether you have young children or grandchildren, you’re probably aware of the rising cost of higher education: The average annual cost of tuition, fees and room and board at a four-year private college rose 3.5 percent, to $46,950, for the 2017—2018 school year, according to data from the College Board.

That figure hit $20,770 for in-state tuition at a four-year public institution, the College Board found.

Families can save for those expenses using a 529 plan, which permits you to invest your money without being subject to tax. You can withdraw from the account to pay for qualified educational expenses free of taxes.

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You can contribute up to $15,000 per year for each 529 beneficiary.

Here’s what’s new. The Tax Cuts and Jobs Act added an extra level of functionality for 529s: K–12 private school tuition.

This may upend the way you save in these accounts.

“Now that you can use the money for K–12 private-school education, be aware of what the time frame is in which you’re investing money in the 529 plan,” said Douglas Boneparth, a certified financial planner and president of Bone Fide Wealth.

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