[quote=FlyerInHi][quote=flu] Doubled my contribution to the 529k…..next year, will start taking capital gains distributions from it tax free to pay for a nieceand nephew private K and 1st grade school
tax free……their parents will each gift me back the money in cash. rinse and repeat each year …..better than investing in my own accounts and having to pay capital gains taxes in it…pretty much the same funds in 529k and my own vanguard after tax account. That $20k in distribution starting next year out of 529k for private k-12 will end up being close to $240k tax free distribution that moves that earned money back out, provided the new tax laws don’t change over the next 12 years. the theoretical limit of each 529k account is slightly over $500k… heh heh[/quote]
Isn’t that illegal. You may not be found out by the IRS. But you know what you did.[/quote]
Nope. Clearly you don’t understand the the tax codes concerning 529k plans that have always existed and clearly you don’t understand the trump/Republican tax reform changes.
You can always open a 529k plan for anyone in your family including yourself and any relative related to you. And you can always change the beneficiary of the 529k plan to anyone subject to the gift tax exclusion. This has existed since the beginning of 529k. This is why if you have a large 529k for one kid and it doesn’t end up used completely, you can designate a new beneficiary… You can even rollover portions part of the money from one 529k to another 529k slowly so that you are well below the gift tax exclusion allowed per person per year. This is all in publication by the IRS. None of this has changed.
(This was one of the sore spots that the Obama administration wanted to go after to pay for The American Opportunity Tax Credit because a tiny percentage of the population that was using the 529k is wealthy and was using the 529k plan to shelter money used for a lot of kids and relatives for generations. However, the vast majority of the people with 529k were just normal middle class and upper middle class , hence why there was such a backlash and why that administration ended up undoing it. )
Now theoretically , before you only could use the 529k towards college tuition.. 4 years and maybe graduate school…financially there was a upper limit on how much you wanted to put into a 529k since it could only be used for college tuition and if you contributed too much , you might be in for penalty when you had to take money back out….
BUT…thanks the Trump/Republican tax reform , the 529k can now be used to pay for private K-12 school for any relative… This was done arguably to union bust and give the finger to public schools since it would encourage more people with more money to put their kids into private schools and to give all those wealthy families that send their kids to private prep schools a huge tax break. But what’s even cooler is you don’t need to be ridiculously wealthy to benefit from this new tax law change… As all you are doing is using the existing (updated) 529k tax rules to allow you to legally pay for any “family” college and now K-12 education and the existing $15k per year per person gift tax exclusion.
And the maximum amount you can contribute to the 529k plan is set by the state adminstered plans, not the IRS. California’s ScholarShare plan cap is slightly above $520k.
.versus Nevadas vanguard plan cap is at $450k.
