For many parents, investing in your children and their education is the best money you can spend. In the era of Covid-19 this may be truer than ever. As a financial planner, my goal is to help parents manage and reduce educational costs by making wise investment and tax-planning decisions.
Recent tax law changes have afforded parents in Virginia excellent benefits in saving and spending for private school and higher education costs. Specifically, parents are now able to distribute up to $10,000/year from 529 plans for qualified private school tuition. This can provide immediate benefits such as:
Each year you can contribute and deduct up to $4,000 in contributions to Virginia 529 plans for Virginia state tax purposes. You can contribute more than this amount, but your deduction is limited for the current year.
Each parent can create their own 529 plan for the benefit of their child. This allows each parent to contribute $4,000. In total, two parents can contribute $8,000 for one child and receive a Virginia state deduction.
If you choose to use 529 plans before college, you likely will want to replenish those balances. However, if you have a plan that may be overfunded or may not be fully utilized due to scholarships, this can be a reasonable approach to utilize those resources in a tax-friendly manner.
All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.