Federal Tax Reform Update
Updated information on the Federal Tax Cuts and Jobs Act of 2017
On December 22, 2017, H.R. 1 of the 115th Congress (the Tax Cuts and Jobs Act of 2017, hereinafter, the “Act”) was signed into law. This Act includes new provisions that allow 529 Plan account owners to withdraw Plan assets to pay for K-12 tuition up to $10,000 per year per beneficiary, and to roll over 529 Plan assets into ABLE Plan accounts, subject to the annual contribution limit, beginning in 2018. These withdrawals will have no federal tax impact.
The New York State Department of Taxation and Finance issued a Preliminary Report on the Act, indicating that it appears that K-12 distributions would not be considered qualified distributions under New York statutes and would require the recapture of any New York State tax benefits that accrued on contributions. NY 529 account owners in other states should seek guidance from the state in which they pay taxes.
The Preliminary Report also indicates that it is possible that rollovers of 529 Plan assets into ABLE Plan accounts would not be taxable events for purposes of New York State taxes, since New York statute currently allows a qualified withdrawal from a New York 529 Plan account for the death or disability of a beneficiary without the recapture of contribution deductions.
We are continuing to evaluate the Act and its tax impact in New York, and we encourage account owners to consult a qualified tax advisor about their personal situation. If you have questions about the NY 529 Direct Plan, you can reach our education savings specialists by phone at 877-NYSAVES (877-697-2837) Monday through Friday from 8 a.m. to 9 p.m., Eastern Time.