529 or Taxable or Mix for K-12

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DesertMan
Posts: 75
Joined: Tue Dec 07, 2010 12:54 pm

529 or Taxable or Mix for K-12

Post by DesertMan » Fri Jan 11, 2019 12:11 pm

I have a baby and hopefully more on the way and want to send them to a particular somewhat expensive private school ($6k/year/kid). The Tax Cuts and Jobs Act allows for K-12 expenses to be paid out of a 529, and ESAs have had that treatment for a while. I am contributing to both. But now I am wondering if I should be less enthusiastic about the 529 option. The TCJ Act has a sunset provision and while nobody can predict the future, it stands to reason that it could expire, and with it the K-12 allowance for 529s, if the political winds blow the way they seem to be going. That being the case, I’d be stuck with the ESAs for K-12 funding and the costs of the school will eat those in a hurry. Would it be prudent to add taxable investing to the mix for this goal and ease up on the 529s in case we find ourselves suddenly unable to use them for this purpose?

Rupert
Posts: 3910
Joined: Fri Aug 17, 2012 12:01 pm

Re: 529 or Taxable or Mix for K-12

Post by Rupert » Fri Jan 11, 2019 1:20 pm

DesertMan wrote:
Fri Jan 11, 2019 12:11 pm
I have a baby and hopefully more on the way and want to send them to a particular somewhat expensive private school ($6k/year/kid). The Tax Cuts and Jobs Act allows for K-12 expenses to be paid out of a 529, and ESAs have had that treatment for a while. I am contributing to both. But now I am wondering if I should be less enthusiastic about the 529 option. The TCJ Act has a sunset provision and while nobody can predict the future, it stands to reason that it could expire, and with it the K-12 allowance for 529s, if the political winds blow the way they seem to be going. That being the case, I’d be stuck with the ESAs for K-12 funding and the costs of the school will eat those in a hurry. Would it be prudent to add taxable investing to the mix for this goal and ease up on the 529s in case we find ourselves suddenly unable to use them for this purpose?
We can't discuss politics here, but of course we all know the law can change. Sometimes tax-law changes, in particular, are made retroactive, i.e., can affect people who acted in reliance on former tax law. See, e.g., recent tax law change affecting HELOCs. If you are genuinely concerned, then, yes, add some taxable investing to the mix. Or just use the 529s as pass-through accounts to pay this year's tuition (and take advantage of any state-tax deductions for those contributions), i.e., don't heavily front-load the accounts for K-12 tuition.

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