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Wolters Kluwer Tax & Accounting Reviews Tax Changes to Federal Tax Breaks for Education Including 529 Plans, ABLE Accounts and Student Loan Debt


Wolters Kluwer Tax & Accounting:

What: The Tax Cuts & Jobs Act did not make as many changes to
federal tax breaks for education as originally proposed, but there are
several changes that affect Code Sec. 529 education savings plans,
Achieving a Better Life Experience (ABLE) accounts (for persons who
become disabled before age 26), student loan debt, and the tuition and
fees deduction.

Why: Taxpayers with school-age children or children with
disabilities should be aware of these changes to take maximum advantage
of appropriate education tax breaks. The following tax changes with
respect to education are generally effective for 2018 and apply to
current educational expenses:

  • The Tax Cuts and Jobs Act allows up to $10,000 in distributions from
    529 plans each year to be used for elementary or secondary (K-12)
    expenses at a public, private or religious school
  • Coverdell Education Savings Accounts for K-12 education expenses
    survive - these have lower contribution limits but a broader
    definition of qualified K-12 education expenses
  • Funds in a 529 plan may be rolled over to an ABLE account for the same
    beneficiary or a family member, with the total rolled over or
    contributed to the ABLE account for the year not to exceed that annual
    ABLE account contribution limit – $15,000 for 2018. The designated
    beneficiary of the ABLE account may make additional contributions
    above this limit up to the lesser of any taxable compensation for the
    year or the federal poverty line for a one-person household – $12,060
    in 2018 (higher in Alaska and Hawaii). Caution should be exercised in
    utilizing this rollover, as ABLE accounts have some unattractive
    features compared to 529 accounts
  • Earlier legislation had provided that if a 529 plan distribution is
    made, but then the student receives a refund of tuition or other
    qualified education expenses, the refund may be recontributed to the
    529 plan tax-free if repaid within 60 days
  • Eligibility to exclude discharges of student loan debt from income is
    expanded to include discharges due to death or permanent disability of
    the student
  • The tuition and fees deduction was retroactively revived for 2017 in
    budget legislation in early 2018, but it has currently expired again
    for 2018

Who: Tax expert Mark Luscombe, JD, LL.M, CPA, Principal Federal
Tax Analyst at Wolters Kluwer Tax & Accounting, is available to discuss
these changes to the federal tax breaks for education.

Contact: To arrange interviews with Mark Luscombe or other
federal and state tax experts from Wolters Kluwer Tax & Accounting on
this or any other tax-related topics, please contact:

347-931-1055 847-267-2046

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