Bucks Writs - Spring 2018 - 21

contributions up to certain
limits. And again, PA is one
of those states!

In 2018 qualified expenses
have been expanded to include
expenses incurred at an eligible
elementary or secondary school.

The tax act has opened up
the ability to roll over up to
the annual gift limit amount
($15,000 for 2018) from an
existing 529 account into a
529 ABLE account for the
same beneficiary. This is
great news for parents of
children with disabilities who
previously opened traditional
529 plans for those children.
The existing 529 plans will
count against any state or
federal benefits, and many
of these children won't incur the qualified expenses of
the traditional 529 plan. The new rollover provision will
allow them to start transitioning those accounts over
from 529s to 529 ABLEs. Although this process may take
a few years, it will help them avoid the current scenario
of taking taxable nonqualified withdrawals and making
new contributions.

* The purchase of computer or peripheral equipment,
computer software, or Internet access and related
services used primarily by the student during any
of the years he or she is enrolled at an eligible
postsecondary school
Under the new act,
however, qualified
expenses have been
expanded to also include
expenses incurred at an
eligible elementary
or secondary
school. These K-12
expenses are capped at
$10,000 in tuition per
designated beneficiary
during a tax year.

529 ABLE accounts were established to
allow disabled beneficiaries to save in a
tax-deferred account that can be used for
education, job training, health care, etc.

The State Tax Deduction Loophole
The state tax deduction for contributions may provide
incentive to put money into a 529 account and then take
it right back out. Why? In theory, you could put money in
a 529 account, get a state tax deduction, and then take
that money right back out to pay for qualified expenses.
With the new tax act, this loophole is especially helpful
since funds can also be used for elementary and high
school education. Some of the states that do offer the
deduction are not happy about this "loophole," fearing
it will reduce revenue. So, don't be surprised if you see
changes to these rules in the future.

The definition of qualified disability expenses is much
more flexible for the 529 ABLE account. These expenses
can include the following:
* Education
* Job training and support
* Health care
* Housing
* Financial management

A Closer Look at 529 ABLE Accounts

Stay tuned for Not Your Average 529 Plan -
Retirement and Estate Planning, Part 2. This article
will explain how 529 plans can be used for other
planning goals such as retirement, estate planning and
multi-generational wealth transfer. 

Lesser-known 529 ABLE (Achieve a Better Life Experience)
accounts were established in 2014 to allow disabled
beneficiaries (or their families) to save in a tax-deferred
account. These accounts do not count as an asset
for state or federal aid eligibility until they exceed
$100,000. Some states also offer state tax deductions for

The author is a financial consultant with CURO
Wealth Management.
21

SPRING 2018



Table of Contents for the Digital Edition of Bucks Writs - Spring 2018

Bucks Writs - Spring 2018 - 1
Bucks Writs - Spring 2018 - 2
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https://www.nxtbook.com/hoffmann/BucksWrits/Summer2020
https://www.nxtbook.com/hoffmann/BucksWrits/BucksWritsSpring2020
https://www.nxtbook.com/hoffmann/BucksWrits/Winter2020
https://www.nxtbook.com/hoffmann/BucksWrits/Fall2019
https://www.nxtbook.com/hoffmann/BucksWrits/Summer2019
https://www.nxtbook.com/hoffmann/BucksWrits/Spring2019
https://www.nxtbook.com/hoffmann/BucksWrits/Winter2019
https://www.nxtbook.com/hoffmann/BucksWrits/Fall2018
https://www.nxtbook.com/hoffmann/BucksWrits/Summer2018
https://www.nxtbook.com/hoffmann/BucksWrits/Spring2018
https://www.nxtbook.com/hoffmann/BucksWrits/Winter2018
https://www.nxtbook.com/hoffmann/BucksWrits/Fall2017
https://www.nxtbook.com/hoffmann/BucksWrits/Summer2017
https://www.nxtbook.com/hoffmann/BucksWrits/Spring2017
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