While most of us are still sorting out exactly how the new tax law will affect our families, the general consensus is that more than 90 percent of American taxpayers will pay less in taxes in 2018.
As such, many in the independent school community hope these changes will give families access to new discretionary income that could be used for their children’s tuition and fees.
While the specifics will vary from state to state and by personal situation, there appear to be several areas of opportunity:
- Families may now use up to $10,000 per year from a 529 account for private school tuition. Previous to this new tax bill, 529 savings could only be used for higher education. For families who might not have planned on boarding school and may thus be wrestling with a larger tuition (sooner than planned) in their child’s preparatory career, this could provide a welcome source of “bridge” funds for the initial transition.
- In some states, 529 contributions are tax-deductible to some extent. In these cases, it might be of benefit to use a 529 as a planning vehicle for secondary school educational expenses in addition to higher education; dollars that go into a 529 might be shielded to some degree from state taxes and thus create added value for a family.
- Overall, the six tax brackets that touch all taxpayers will each be reduced. Three of the middle brackets – in which many secondary school families reside – will see particular savings:
$77,500 – tax rate goes from 25% to 22%
$165,000 – tax rate goes from 28% to 24%
$315,000 – tax rate goes from 33% to 32%
- Some families may also feel a positive impact from the reduction of the corporate tax rate from 35 percent to 21 percent, which may lead to improved compensation packages for employees and higher returns for shareholders.
While we at Blue Ridge are experts at educating college-bound boys, we are not qualified to give financial advice. These thoughts are from a layman’s view and are hoped only to inspire – not necessarily to guide. Please consult your financial advisor or plan manager for more detailed information about your personal situation.
To all of you who have made Blue Ridge School a financial priority for your families, thank you! I often say that tuition is venture capital invested in our most precious and promising assets…our children. The returns are tremendous!
We hope to see you and yours in St. George again soon.