Some regulation changes may affect you.
Laws and regulations evolve.
The Internal Revenue Service and Treasury Departments in particular like to make changes.
According to a recent Think Advisor article titled “IRS, Treasury to Issue 529 Plan Regs,” these departments recently made tax law changes and issued regulation affecting 529 plans and ABLE accounts.
The IRS and The U.S. Treasury Department have not clarified the changes.
Until then, the Notice will be a guide to taxpayers, beneficiaries, and administrators of Achieving Better Life Experience and 529 programs.
What will the new regulations do?
In short, they will make the tax treatment of a special rule for 529 Plan beneficiaries, added under the PATH Act, simpler.
Let us say the student gets a refund on his or her tuition or another qualified expense.
The refund money will be tax-free, if it is recontributed to the 529 plan account within 60 days.
Do these refunds count against the contribution limits for the account?
No, they will not.
The 2017 tax law also changed rules regarding distributions from 529 plans.
The 529 plan can only be used to pay a total of $10,000 of tuition per beneficiary.
This is the same regardless of the number of contributing plans.
Tuition can be paid for education at a K-12 public, private, or religiously affiliated schools as well as for universities.
The third change involved both ABLE accounts and 529 plans.
What are the differences between these accounts?
529 plans are accounts used for qualified education expenses.
ABLE accounts are used to help those who became disabled before age 26 with disability-related expenses.
What does this regulation do?
The regulation deals with a law allowing funds from the 529 plan of a designated beneficiary to be rolled over to an ABLE account.
It says any contributions made to the ABLE account of the designated beneficiary and any rollovers from 529 plans cannot exceed the annual contribution limit for an ABLE account.
What is this limit?
It is $15,000 in 2018.
If you (or a loved one) have an ABLE account or a 529 plan, these rules will apply to you.
Be sure to plan accordingly.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Think Advisor (July 30, 2018) “IRS, Treasury to Issue 529 Plan Regs”