Share on FacebookTweet about this on TwitterEmail this to someone
Share on FacebookTweet about this on TwitterEmail this to someone
Photo via Facebook/Futures in Education
Photo via Facebook/Futures in Education

At a time when two Queens Catholic schools have announced that declining enrollment will force them to close in 2018, a provision in the new federal tax law has the potential to change things for the better.

Signed into law on Dec. 22, 2017, the tax reform bill included a late amendment that allows 529 plan savings to also be used for private/religious K-12 education. The 529 accounts used to be designated for college savings and are state-sponsored, managed by investment companies and allowed to gain tax-free interest. Account owners can now withdraw up to $10,000 per year for each beneficiary for elementary and secondary education costs at private schools.

According to Paul Kerzner, president of the Ridgewood Property Owners and Civic Association and longtime advocate for the St. Matthias Catholic Academy in Ridgewood, the provision is a “great expansion for the original intent of the program.” He added that it could even help prevent the impending closure of St. Pancras if the school is able to spread the word.

You could get a hundred new students to the school, so I would at least try it,” Kerzner said.

Since the 529 plans are ultimately governed by each state, many of them include a deduction on state income taxes to encourage more families to create an account.

Gregory Haufe, the treasurer of the St. Matthias Catholic Academy board, said that while he hasn’t had the chance to fully understand all of the new provision’s details, it appears to be a step in the right direction. Haufe said that he plans to hold a meeting with parents to discuss the 529 plan changes next month.

“One thing I can say is that I’m surprised more people haven’t jumped on it yet,” Haufe said.

A report from NPR explains some possible drawbacks of the changes. If it results in a significant increase in the number of people with 529 accounts, that likely means the state would lose money because of the tax deductions, the report describes. That could then lead to the state amending its own tax laws to prevent such a loss.

There is also the possibility that families will no longer use the 529 accounts for their original intended purpose, which is to let money grow long term. Instead, they may be inclined to simply put money in and withdraw it a month later to sidestep the state taxes. Either way, the account holders seem to be the main beneficiaries of the new provision.

Salvatore Candela of the Tax Advocate Group in Middle Village said that he would be surprised if New York changed its tax laws in response to the federal changes. He has also been advising his clients to maintain their current 529 accounts for college savings and open a second 529 if they wish to take advantage of the new provision.

“I don’t see the governor doing anything to hurt trying to pay for private schools; it would take me aback if that happened,” Candela said. “The only drawback I can think of is people taking money that was originally intended for college.”

Ultimately, experts do not believe that the provision will influence more public school students to transfer to private schools.

Comments:

Join The Discussion



Popular Stories
Photo via Shutterstock/Insets courtesy of NYPD
Thieves use cloned debit cards at Queens ATMs to steal thousands from victims' bank accounts
Photo courtesy of the Bayside BID
Sample some of Bayside's best restaurants during the 'Bell Boulevard Food & Music Fest'
Photo via Facebook/snowdaysnyc
Shaved ice cream shop Snowdays to open in Bayside early this summer


Skip to toolbar