A provision in the new GOP tax plan helps families save more for their child’s education — extra money that could give families greater freedom of choice in K-12 schooling.
Released last Thursday, the new tax plan allows families to save up to $10,000 for their children’s K-12 education in a 529 savings account. Families can start saving in these accounts before their children are born.
529 savings accounts are state-backed savings accounts that allow various family members to contribute money toward a child’s college tuition and higher education expenses. Withdrawals are free from federal income tax and money spent from the accounts is tax-free if used for approved educational expenses. 35 states offer tax credits or deductions for contributions to 529 savings programs.
The Heritage Foundation argues that this part of the GOP tax plan is smart policy. It encourages long-term saving for education, and the tax benefit aids families who wish to choose non-public options for their children but are on the threshold of not being able to afford private education.
Interestingly, some of the most avid school choice proponents believe that the tax plan will not help those who are most in need of expanded educational choices for two reasons.
First, the bill’s proviso presupposes that families have the money to place in 529 savings accounts — a fact that applies more to middle-class families than to those below the federal poverty line. Second, a 2016 survey by Edward Jones investment firm concluded that only 18 percent of households, earning less than $35,000 annually, could identify what a 529 savings plan is.
Secretary of Education Betsy DeVos marketed this part of the bill as a benefit to middle-class families, rather than low-income families. DeVos praised the provision of the bill as “a strong and proven tool to help make education more affordable for middle-class families.”
Kate Hardiman is pursuing a Masters in Education from Notre Dame and teaches English and Religion at a high school in Chicago.
