Federal tax reform update
On December 22, 2017, the president signed H.R. 1, the federal tax reform bill, into law. The law permits withdrawals from a 529 college savings account up to $10,000 per year per student for tuition expenses in connection with enrollment and attendance at an elementary or secondary public, private or religious school (“K-12 tuition”). We are working on updating our website to reflect the new U.S. tax law. In the meantime, please note the following:
- Indiana taxpayers should consult their tax advisors before making a withdrawal for K-12 tuition and/or before making a contribution which they intend to ultimately withdraw for K-12 tuition. It may require action by the Indiana General Assembly to extend favorable Indiana state tax treatment to withdrawals for K-12 tuition taken from a CollegeChoice Savings Plan account. Additionally, if a distribution is not considered qualified for state tax purposes, it would trigger a recapture of previous state tax credits claimed under Indiana tax law.
- Account owners can withdraw assets to pay K-12 tuition and treat the withdrawals as qualified expenses for federal tax law purposes.
- Account owners can roll over funds in 529 Plan accounts to ABLE Plan accounts without federal tax consequences, up to the annual $15,000 contribution limit. However, a rollover could currently trigger a recapture of previous state tax credits claimed under Indiana tax law. It may require action by the Indiana General Assembly to extend favorable Indiana state tax treatment to rollovers from a CollegeChoice Savings Plan account to an ABLE Plan account.
- We will provide more information as additional details about the effects of the new federal tax law on Indiana state tax law become clear. In the meantime, we encourage you to consult a qualified tax advisor about your personal circumstances.