If we are to believe the Republican policymakers who control the current attempt to overhaul our tax system, a big point of the exercise is to help the middle class. So how best to explain a possible tax break of more than $30,000 per child for wealthy families who send their kids to private school?
That number is the potential net new tax savings, under the House tax plan, for parents who deposit a large amount of money when their kids are born. They would get that benefit by using the money for children starting private school in kindergarten and attending through high school.
Buried in Section 1202 of the tax bill are a number of proposals to consolidate and simplify various tax breaks for education savings. Part of the section in effect would neuter something called a Coverdell account, which families have used for years to save for both private school and college.
But then comes the big change: Elementary and high school expenses of up to $10,000 per year would become “qualified” expenses for 529 plans. Translation? You could pull $10,000 each year out of your 529 account for private school and avoid paying taxes on any previous growth. There are no income limits on who can use 529 plans, and you would be able to keep right on saving for college as well.
