Can I Use NYS 529 Plan Money for Elementary and Secondary Private School?

Can I Use NYS 529 Plan Money for Elementary and Secondary Private School?

Parents and guardians often seek to understand whether they can use their New York State (NYS) 529 plan savings for elementary and secondary private school tuition. This article aims to provide a comprehensive explanation of the regulations and considerations.

The Current State of Play

With the passage of the 2017 Tax Cuts and Jobs Act, withdrawals up to $10,000 for tuition at private K-12 schools are considered qualified federal expenses. However, this exemption does not apply in all states, including New York. Here, New York State does not automatically conform to federal legislative updates, which means K-12 private school tuition is not a qualified expense.

Tax Implications for NYS Residents

For New York residents, a withdrawal for K-12 private school tuition would face several challenges:

Tuition: The federal tax and penalty exemption does not apply to the state of New York. Therefore, the withdrawal will be subject to state tax. Deduction Recapture: If you claimed a New York state tax deduction for contributions to your 529 plan, you will face a deduction recapture. This means you will need to pay back the state for the deduction you claimed, plus state tax on the earnings from the 529 plan.

The Bottom Line

While you can always withdraw money from a 529 plan, the tax treatment and potential penalties make it problematic for K-12 private school tuition in New York. It is strongly advisable to consult with your 529 plan sponsor and a tax professional to ensure you understand the full implications.

Further Reading

For more detailed information on New York’s 529 plan and the current policies, you can refer to the following resource:

NYS 529 Plan Expansion Memo, February 2018

Please note that this information does not constitute tax advice and is provided for informational purposes only. It is always recommended to consult with a tax advisor, financial advisor, local taxing authority, and/or the plan provider or sponsor for the most accurate and up-to-date guidance.