Senate Republicans Propose Expansion of 529 Education Savings Accounts

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Posted by Alex Hendrie on Tuesday, September 8th, 2020, 3:15 PM PERMALINK

Senate Republicans led by Majority Leader Mitch McConnell (R-Ky.) are proposing to expand 529 education savings accounts in their recently released “Delivering Immediate Relief to America’s Families, Schools and Small Businesses Act.”

The proposal allows Americans to use 529s for K-12 expenses for students engaged in home learning including students enrolled in public, private, or religious school and students that are homeschooled through the end of 2022. 

Qualified expenses include curriculum materials, books, online educational materials, tutoring costs, fees for standardized testing, and expenses for students with disabilities.

The coronavirus pandemic has resulted in additional costs for American families stemming from the need to ensure schools open safely and the implementation of online and distance learning. These new costs are exacerbated by the financial hardships that Americans are experiencing across the country due to a lost job, or reduction in work hours.

529s will help Americans mitigate these expenses. They are already a proven way for families to meet education expenses. These tax advantaged savings accounts allow parents to save and invest after-tax income for education costs. They can currently be used to cover the cost of college and K-12 expenses including tuition, fees, books, supplies, equipment, and computers.

In addition, these accounts offer significant tax reduction. Any money earned in an account can be invested tax free and funds can be withdrawn for qualified expenses tax free. Although contributions are not federally deductible, over 30 states offer a full or partial tax deduction for 529 contributions.

Because of these benefits, 529s are extremely popular amongst middle class American families. Today, there are over 14 million 529 accounts.

Expanding 529s will help Americans get through the pandemic by providing assistance to students and families across the country. This provision should be supported by the Senate and signed into law as part of the next COVID-19 relief package.

Photo Credit: Gage Skidmore

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