Updated Thoughts on the 529 Program Changes for our Lutheran Schools

Back in January, we outlined the changes coming to the 529 plans, including the change that withdraws up to $10,000 per year are also eligible for K-12 educational expenses at private and religious schools, including our area Lutheran schools and Concordia Lutheran High School.

Since that article, Indiana has modified things just a bit:

  • The K-12 school to benefit from your 529 plan must be in Indiana
  • In 2018, 10% of total contributions up to $500 can be for K-12 education, then in 2019, the deduction can be the full 20% up to $1,000
  • Reminder that in Indiana, the state tax credit cannot exceed $1,000 per family and is nonrefundable.

You can see a more technical description with this Baden Article where they remind everyone that in Indiana, the state tax credit cannot exceed $1,000 per family per year and is nonrefundable.

So, how can K-12 schools promote and benefit from the enhanced 529 plans? The points listed last time are still valid:

  • Promote saving, as early as possible: wanting to send your newborn to a Lutheran school but worried about elementary school tuition? Or, do you have your K-8 costs managed, but wonder how you can afford to send Johnny to a Christ-centered high school? Start adding “Gifts to the 529” to everyone’s Christmas lists as soon as possible. The sooner you start saving, the greater the benefit from tax-free compounding interest.
  • According to Indiana’s plan FAQ, while you cannot create a 529 account for an unborn child, you can create an account, name yourself as beneficiary, but later change the beneficiary to a future child.
  • In Indiana, there is not a waiting period between donations and withdraws as long as the 529 account stays open for at least a year from the initial deposit date.
  • How many other ways are there for grandparents to directly impact the education of Little Sally than helping fund their 529 plan, grow tax-free, and receive a 20% state tax credit in return?!
  • Families pay for tuition, anyway… why not plan accordingly and receive a state tax benefit?

Catch the Lutheran Spirit, save for K-12 and college education, and utilize all your options, including the SGO Program.