Estate Planning: Helping Protect Your Interests

Tax Reform Expands Benefit of Tuition Savings, ABLE Programs

Misty A. Watson

Misty A. Watson




Co-authored by Misty Watson and Joshua Rose

The Tax Cuts and Jobs Act of 2017 (TCJA) introduced a number of changes to the tax code for individual taxpayers. Major changes included lowering individual tax rates, increasing the standard deduction, and increasing the child tax credit.

The legislation also made significant, but often overlooked, changes to the tax treatment of contributions to qualified tuition savings and ABLE programs.

Qualified Tuition Programs (§ 529 Plans)

529 plans are tax-advantaged investment plans designed to encourage saving for the cost of education. 529 plans offer a number of tax benefits:

  • Earnings. As 529 plans grow in value, earnings on investments are not subject to state or federal income tax, so savings grow tax-free.
  • Contributions. In Missouri, owners of 529 plan accounts may deduct up to $8,000 ($16,000 if married filing jointly) of 529 plan contributions from Missouri state income tax.
  • Withdrawals. Funds withdrawn to pay for qualifying educational expenses are not subject to state or federal income tax.

Prior to the TCJA, funds withdrawn from 529 plans could only be used for “qualified higher education expenses,” which included tuition, fees, books, supplies, and other equipment required for attendance at an institution of higher education, most often a college or university. Continue reading »