New tax law expands education savings plan to include Catholic schools tuition

Fresh from giving a presentation about the new tax law, on Jan. 15, Deacon Matt Witte described the new benefits of Missouri's 529 College Savings Plan (MOST) as, simply, "pretty cool."

"It's really wide-open architecture for anyone who wants to use 529 money for grade school and high school now," said Deacon Witte, a financial planner.

Effective Jan. 1, parents in Missouri may apply funds from the Missouri 529 plan toward tuition for private elementary and secondary education, including religious schools, an expansion of the savings plan. From its inception in the mid-1990s until now, MOST funds had been limited to expenses related solely to college. That changed in late December when President Donald J. Trump signed into law the Tax Cuts And Jobs Act, which included the expansion of 529 plans to include the entire educational experience, kindergarten through college.

In 529 plans, after-tax contributions grow tax-free, and the earnings may be withdrawn tax-free for educational needs. In addition, parents, grandparents, relatives or friends may own a 529 plan for a specific child. An individual may contribute up to $15,000 a year, or $30,000 a year for a couple, to avoid a gift tax. Account owners and beneficiaries may have multiple accounts.

In addition, $8,000 of the contribution for an individual (or $16,000 for a couple) may be taken as a deduction on Missouri state income taxes. With the tax rate at 6 percent, that amounts to a tax savings of $480 for an individual ($960 for a couple).

This allows the 529 account owner to make a contribution, then immediately withdraw it for Catholic school tuition up to a limit of $10,000 per student (or beneficiary) per year and get the tax break. That is more than enough to pay for a child's Catholic grade school tuition, all or most tuition for diocesan high schools, or a big chunk of private Catholic high school tuition in the Archdiocese of St. Louis. More than 33,000 students are enrolled among 133 Catholic schools in the archdiocese.

Also, contributors have no income limits. They may contribute to the Missouri 529 plan regardless of their income.

Deacon Witte described the expansion of 529 as "a very nice thing for the Catholic Church and Catholic schools."

Wearing their Catholic education hats, Missouri Treasurer Eric Schmitt of Webster Groves and U.S. Rep. Ann Wagner gave 529 expansion the thumbs-up. Schmitt grew up in St. Blaise Parish in Maryland Heights and graduated from De Smet Jesuit High School; Wagner grew up in St. Clare of Assisi Parish in Ellisville and is a graduate of Cor Jesu Academy.

Schmitt called the expansion "the biggest kind of education reform in decades."

"Families can now make the decision where to send their child, and it expands the tax advantages," he said. "It just opens things up for middle-class families making those sacrifices."

Catholic education through the Jesuits "had a big influence on me at De Smet with the 'Men for Others' concept," Schmitt said. "The foundation I got at De Smet about serving your brothers and sisters and neighbors, believing in something bigger than yourself, was a big influence for me. There so many great schools and options for families in St. Louis; this can be a part of how people plan now there for their education."

Wagner likewise predicted the expansion will have a "tremendous impact for hard-working families" in the archdiocese, giving educational options beyond public schools in their immediate area. She described the new plan as "the most significant school-choice legislation in history."

"As someone who put all of her children through St. Clare of Assisi, Ursuline, Priory and SLUH, I would have loved to have this opportunity," she said. "This is so exciting." 

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