Using a 529 Plan for Your Child's Early Education


Using a 529 Plan for Your Child's Early Education


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For many parents, saving for a child's future education is a top priority. 529 plans are a popular option, allowing tax-advantaged investing for higher education costs. But did you know that recent changes allow you to use a 529 plan for K–12 tuition expenses, too? This gives families more options in planning for a child’s full educational journey.

529 Refresh: How It Works

First, a quick refresher on 529 plans. A 529 plan lets you invest money for future education expenses. Investments grow tax-free, and withdrawals are also tax-free when used for qualified expenses. These include tuition, room and board, books, computers, and more.

529 contributions are made with after-tax dollars, but many states offer tax deductions or credits for contributions. In New Mexico, contributions to a 529 account with The Education Plan are eligible for tax-deduction on New Mexico state income tax returns.

Accounts can be opened by parents, grandparents, or other relatives and friends. The beneficiary can later be changed to another qualifying family member if needed. While originally intended for college, 529 plans can now also assist with early education tuition expenses.

How to Use a 529 Plan for K-12 Tuition

In late 2017, the federal tax code was changed to allow 529 plan withdrawals of up to $10,000 annually per child for public, private and religious elementary or secondary school tuition.

It's important to understand the specifics of what is and isn't allowed, for example:

  • Up to $10,000 can be withdrawn tax-free only for tuition expenses. Not for books, transportation, computers, or other costs.
  • Not all states have adopted this new rule. Check your own state's 529 plan guidelines. New Mexico, where The Education Plan is sponsored, does allow withdrawals for K-12 tuition.

Strategic Times to Tap Into 529 Funds

Many 529 plans are structured for future education, and timing is important when using the funds for early schooling. Here are potential situations to consider:

1. The account is overfunded for college

If, through diligent saving, you've amassed more in your 529 than you believe will be needed for college, K-12 tuition may be a smart additional use. Paying for an eligible elementary, middle, or high school tuition expense lets you draw down potential surplus. Or you can change the beneficiary to a younger sibling and keep saving for the future. The account can be transferred between qualified family members with no tax penalties.

2. To capture state tax breaks

More than 30 states, including New Mexico, offer a state income tax deduction or credit for 529 contributions. If you'll be paying private school tuition anyway, it could be beneficial to deposit funds in a 529 plan.

3. As an available temporary solution

Some parents use a 529 withdrawal as a short-term fix if there's a disruption in income for a short time period, such as a medical event, a job change, or other loss of income. A $10,000 tuition payment from the 529 plan can help bridge the gap and keep a child enrolled while finances stabilize.

This strategy may only work for a limited time since the annual withdrawal maximum is $10,000 per child. It shouldn't replace careful budgeting.

If You’re Not Sure, Use Caution

While the new rules allow more possibilities for 529 savings, it’s also important to know when it may not make sense:

  • Carefully consider withdrawals early in the beneficiary's life. The benefit of 529 plans is tax-free compound growth over many years. Withdrawals in early elementary school may limit this depending on your contribution and investment strategy.
  • Be cautious of yearly limits. Since you can only use $10,000 per beneficiary annually for K–12 schools, tuition in excess of the limit will not be considered qualified.

529 Plans and Preschool: What You Need to Know

A common question is whether 529 plans can be used for preschool and early childhood education costs. Unfortunately, the answer is no—529 funds withdrawn for preschool tuition would not be a qualified expense.

Some reasons why:

  • Preschool is not considered "elementary education" by the IRS definition. To qualify, a program must have a stated educational curriculum to be considered elementary. Most preschools and day care are classified as childcare only.
  • Since children typically attend only part-day sessions in preschool and do not receive grades, credits, or graduation documentation, preschools don't meet the requirements of an eligible school.
  • Expenses outside of K–12 tuition, like application fees, supplies, transportation, food programs, and extended day care, are not qualified expenses. So even if preschool was eligible, the costs often don't fall under the approved tuition-only rules.

Parents, therefore, cannot pay for preschool from 529 accounts in the same way as for elementary, middle, and high schools. Preschool costs need to be budgeted from normal income cash flow, savings, or other accounts.

That said, contributing regularly to a 529 during the preschool years is smart prep. This builds up a solid base for when the account can start being used for K–12 tuition later.

Start Saving Early for Education

With college costs continuing to rise, saving early for children's future education is key. And new tax law changes allow families more options by permitting 529 plan use for elementary and secondary school tuition.

This allows parents to potentially enhance their early education savings strategy. By understanding the specifics of how and when 529 funds can be tapped, you can make informed choices for your child's educational needs from preschool through college.

The tax benefits and flexibility of 529s make them a top choice for future education investing. And now K–12 tuition expenses can be considered as well when the timing and situation make sense. But be sure to consult with financial and tax advisors to map out a personalized education savings strategy that best fits your family's needs and budget.

What experiences do you have saving in a 529 plan? Do you plan to use the account for early education expenses or stick to the traditional college savings route? Share your thoughts with families like yours on our social channels.

Final Thoughts

Saving for your child's education is one of the most important investments you can make in their future success. By understanding all the options, you can develop a strategic savings approach. Start contributing to tax-advantaged 529 accounts as soon as possible and stay involved throughout the years. With proper planning and diligent saving, you'll be on your way to helping fund the education your child deserves.

Ready to start saving? You can open a 529 savings account with The Education Plan in about 15 minutes.


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For more information about The Education Plan, call 1.877.337.5268 or view the Plan Description and Participation Agreement, which includes investment objectives, risks, charges, expenses, and other important information; read and consider it carefully before investing.

Please Note: Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s qualified tuition program. You also should consult a financial, tax, or other advisor to learn more about how state-based benefits (or any limitations) would apply to your specific circumstances. You also may wish to contact directly your home state’s 529 plan(s), or any other 529 plan, to learn more about those plan’s features, benefits and limitations. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision.

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