New 529 Rule Changes and What They Mean for CSAs

With the passage of the Tax Cuts and Jobs Act (TCJA) last December, Congress made sweeping changes to the tax code. In addition to the more well-known provisions, such as reducing tax rates for many businesses and individuals and increasing the standard deduction, the TCJA also included less well-known changes that may impact children’s savings accounts (CSAs). In particular, the federal legislation expanded the allowable uses of 529 college savings plans to include withdrawals of up to $10,000 annually for K-12 tuition. Since more than half of CSA programs use 529 plans as their account product, CSA program managers and other supporters have been trying to understand the implications of the 529 rule changes.

To provide up-to-date information and guidance on this important topic, the Campaign for Every Kid’s Future just released a new policy brief to explain what these changes mean for CSA programs. 

The brief, titled How Do Changes to 529 Rules Affect Children's Savings Accounts Programs?, answers the many questions raised by the 529 rule changes and concludes that the new federal rule changes do not affect the ability of CSA programs to retain previous or define new restrictions on funds for post-secondary education use. At the same time, implications of the 529 changes depend, in part, on the specific account structure that CSA programs use. CSAs that use a 529 account as their savings vehicle should assess their own account structure in light of the response of their state government to the federal changes.

Prosperity Now and its partners in the Campaign for Every Kid’s Future will continue to follow new developments and update the field.

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