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Impact of Recent Tax Reform on Private School Tuition

We wanted to draw your attention to some changes in the U.S. Tax Code that occurred over our Winter Break that could benefit families who want to send their kids to or already have their kids in private school.

But first, some disclaimers:

  1. In researching this part of the tax reform legislation, it is obvious there are a lot of different views of the tax reform legislation. This notice is neither a critique, nor an endorsement of the legislation. We simply want you to know how the law impacts K-12 private school tuition.
  2. We are not accountants and are not qualified to provide financial advice. We simply want to point out a public policy change that might benefit some Prism families. If you want any further information on this, please reach out to an accountant.

All that said—here is the skinny on the law as we understand it:

  • Education savings accounts (ESAs) for college have existed since around 1996. These savings accounts allow families to deposit money into an investment account, earn interest (at an average rate of 6%, sometimes lower, sometimes higher), and then use the earnings tax-free for college.
  • The tax bill passed by Congress on December 20 now allows ESAs to be used for K-12 private school as well. This means parents can use investment income from the ESA tax-free on K-12 private school tuition.
  • Funds deposited into an ESA are not tax-deductible at a federal level, but based on the linked site, Arkansas provides a tax deduction for $5,000 per parent for contributions to a 529

The bill went into effect for 2018, so you may be able to benefit from this immediately. If you are unsure, please contact an accountant or financial advisor.

This was an informative article about the bill

Here is an article about the bill:

Here is an article about 529s written before the bill passed. Now--as I understand it--where it says college, it can also include K-12 private education expenses.