Federal Tax Update

On December 20, 2019, the federal Further Consolidated Appropriations Act of 2020 (including portions of the Setting Every Community Up for Retirement Enhancement [SECURE] Act of 2019) was signed into law. It includes new provisions that allow 529 Plan account owners to withdraw assets to pay for certain apprenticeship programs and to pay principal and interest on qualified higher education loans for the beneficiary or any of the beneficiary's siblings. The loan repayment provisions apply to repayments up to $10,000 per individual. These withdrawals will have no federal tax impact.

Under New York State law, these distributions 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. This Act is effective for distributions made after December 31, 2018.  Account owners are encouraged to consult a qualified tax advisor about their personal situations.