Federal Tax Reform Update

Updated information on the Federal Tax Cuts and Jobs Act of 2017

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H.R. 1 of the 115th Congress (the Tax Cuts and Jobs Act of 2017 or the “Act”) was signed into law in December 2017. The Act included provisions that allow 529 Plan account owners to withdraw Plan assets to pay for K-12 tuition expenses 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.

Under New York State law, distributions for K-12 tuition expenses are considered nonqualified withdrawals and will require the recapture of any New York State tax benefits that have accrued on contributions. NY 529 account owners in other states should seek guidance from the state in which they pay taxes. Rollovers of 529 Plan assets into ABLE Plan accounts are not considered taxable events for New York State tax purposes.