Expanded Tax Benefits for K-12 Education and School Choice Incentives
This act significantly broadens how tax-advantaged 529 savings plans can be used, covering a wide range of elementary and secondary education expenses, including homeschooling costs. It doubles the annual tax-free withdrawal limit for K-12 expenses to $20,000 per student. Furthermore, the law uses federal tax incentives to pressure states into adopting and expanding school choice programs like vouchers and education savings accounts.
Key points
529 Plan Expansion: Funds can now be used for tuition, curriculum, books, tutoring, and educational therapies for K-12 students, including those in public, private, religious, and homeschool settings.
Increased Withdrawal Limit: The annual limit for tax-free 529 withdrawals for K-12 expenses is raised from $10,000 to $20,000 per beneficiary.
State Financial Pressure: States that fail to implement or expand school choice programs may lose the full tax-exempt status on their municipal bonds, potentially increasing state borrowing costs for public projects.
Expired
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