May I use my USAA 529 account to pay for private high school?

JimboCowboy
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May I use my USAA 529 account to pay for private high school?

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Answers (1)

Answers (1)

JimboCowboy,

Thank you for this great question.  Let me give you the quick answer and then a few things to consider before you make your final decision.  The short answer is "Yes."  One of the benefits of the Tax Cuts and Jobs Act of 2017 is that you can now use up to $10,000 annually per beneficiary of 529 balances to pay for qualified K-12 tuition expenses.  That amount will be free from federal taxes but not necessarily state taxes.  That is why we recommend consulting a tax advisor because state laws on treatment of 529 funds used for K-12 education vary and states may change their tax laws frequently.  

 

But, what if you left those 529 funds in the account longer and used it for college education instead of private high school?  Below are three thoughts to consider.

  1. Potential for more growth:  The longer you allow the 529 balances to grow, the greater the potential balance when entering college.  The earlier you take out the funds, the lower the potential for growth and the less you might have in the long run.
  2. Greater uses of the funds in college:  The list of 529 qualified expenses is larger for college than for K-12.  In college, 529 balances can be used for things like books, room/board, and computer but K-12 is limited to only tuition expenses.
  3. State tax consideration: As mentioned above, using 529 balances for K-12 expenses is allowed at the federal level and is federally tax free but it might not be allowed by your state. 

 

I hope that this has both answered your question, and also given you a few things to consider before making this decision.  Best of luck and reach out if you have any additional questions.