The Tax Cuts and Jobs Act of 2017 (Public Law 115-97) brought a significant change to how you can spend 529 plan money, and erased a key difference between 529 plans and Coverdell Education Savings Accounts:
529 plan money can now be used for up to $10,000 expenses at K-12 schools per year, per beneficiary. Previously, 529 plan money could only be used for post-secondary education.
These new rules start in 2018.
The language specifically notes:
TREATMENT OF ELEMENTARY AND SECONDARY TUITION.—Any reference in this subsection to the term ‘qualified higher education expense’ shall include a reference to expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.”.
Using up to $10k per child, per year, to cover your private school or religious school tuition is definitely permissible under the new rules. (If your tuition expense is less than $10k, then that's the maximum that's clearly OK.)
Be sure you do the withdrawal in the same calendar year as the incurred expense, to be fully compliant with the rules. Example: If your child is transferring from public to private school starting in January 2020, don't do the withdrawal in December 2019...wait for 2020.
The slightly odd part here is the reference to "tuition in connection with enrollment or attendance at ... public ... school."
What?!
What public school has tuition? The Venn diagram of K-12 schools charging tuition and public K-12 schools has zero overlap.
I'm wondering if this was a drafting error that will be corrected later.
The original law forming 529 plans and the IRS's instructions clearly talk about qualified education expenses for higher education including various expenses in connection with enrollment and attendance that go well beyond tuition (textbooks, computers, etc.).
It appears that the K-12 approved expenses are much narrower, only covering tuition.
If you are thinking of using 529 plan money for anything other than a clearly defined "tuition payment", I'd strongly suggest consulting with a tax advisor to see if that's even permissible under this new rule set. (I'm guessing it's not, but I'm not a tax advisor -- if anyone reading this is, I'd love to hear your perspective!)
This inclusion of public school, but in a manner that results in zero usefulness seems...puzzling.
If you're like me and like to read original sources, you can check out the language of Public Law 115-97 Section 11032 here - just do a search for 11032 and you'll see the language around paying for K-12.
