Tax Reform FAQ
Will the 2017 federal tax reform act impact my my529 account?
- There are two main provisions that will impact all 529 accounts, including my529 accounts. These include:
- Withdrawals from a 529 account to pay for certain K-12 tuition expenses
- Rollovers from 529 accounts to ABLE accounts
Can I use my 529 account to pay K-12 (kindergarten through high school) tuition expenses?
- 529 accounts can be used to pay up to an aggregate of $10,000 annually per beneficiary in tuition expenses in connection with enrollment or attendance at public, private or religious elementary and secondary schools.
- No additional clarification is available as of yet for what expenses are included in “tuition expenses.”
- The aggregate amount withdrawn from all 529 savings accounts for the beneficiary (this includes my529 accounts and any other 529 savings accounts with other programs regardless of who owns the account) may not exceed $10,000 in K-12 tuition expenses incurred during the taxable year.
- The account owner is responsible for retaining all receipts and documentation to support any withdrawals during the taxable year.
- Withdrawals from a my529 account will be paid to the account owner only. Payments will not be made to the beneficiary or the school.
- Consult with your own tax advisor for any questions you may have regarding what expenses are included in tuition expenses.
- Account owners may begin using their 529 accounts to pay K-12 tuition expenses on or after January 1, 2018.
May I roll over my 529 account to an ABLE account?
- Funds in a 529 account may be rolled over to an ABLE account owned by either the 529 account’s designated beneficiary or a member of the family of the 529 account’s designated beneficiary.
- The rollover amount will count toward the current annual ABLE account contribution limit.
- Utah residents will be required to recapture any Utah state tax credits or deductions previously claimed for contributions to their my529 account. However, they may claim a Utah state tax credit for rolling over the money to an ABLE account up to a certain amount.
- Consult with the ABLE program to which you are rolling over funds for any questions you may have about the ABLE account.
- Consult with your own tax advisor for any questions you may have regarding your individual tax situation.
- Rolling over funds from a 529 account to an ABLE account became effective beginning December 23, 2017.
What is an ABLE account?
- An ABLE account, created under Section 529A of the Internal Revenue Code of 1986, as amended, is a tax-advantaged savings account for eligible individuals with disabilities to use for their qualified disability expenses.
- The state of Utah does not have an ABLE program at this time. my529 does not offer ABLE accounts.
- You may open an ABLE account in another state that accepts out-of-state residents. More information may be found at ablenrc.org.
- Utah residents may claim a Utah state tax credit for contributions to an ABLE account in another state.
- For more information about opening an ABLE account or rolling over 529 account funds to an ABLE account, contact an ABLE account provider.