News Post

What new tax law means for independent school families
What new tax law means for independent school families
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Landon Chief Financial Officer-Chief Operating Officer Jeremy Kugel wrote this blog about how new tax laws could benefit Landon families as they make tuition payments.

Landon Chief Financial Officer-Chief Operating Officer Jeremy Kugel wrote this blog about how new tax laws could benefit Landon families as they make tuition payments.

The tax reform law passed in the final days of 2017 brings about a variety of changes that can impact independent school families. As Landon's CFO, I am neither authorized nor qualified to provide specific advice on matters of personal finance. That said, I recognize the major investment you are making in education and do not want to miss the opportunity to share information you might find useful.

As you may know, the new law has expanded the provisions of the so-called 529 tax-advantaged savings plan. The new tax code now allows $10,000 in annual tax-free 529 account withdrawals for tuition payments for students enrolled in independent schools.

Can this change save you money on Landon tuition? The answer not surprisingly is: that depends. It depends on where you work (Maryland, Virginia and the District have different policies on local taxes), whether you already have a 529 you're using to save for college, performance and results in the 529, and a variety of other individual circumstances.

Jeffrey A. Bernfeld is a certified financial planner (CFP) and senior financial Advisor with Greenspring Wealth Management, with ties to the Landon community. According to Jeff, there is one circumstance in particular where families can benefit.

"If a family is not currently contributing to a 529 plan, they can make a contribution, wait a few weeks or months, and then use the 529 funds to pay Landon tuition," Jeff says. "By doing this, if they are Maryland residents and taxpayers, they can save approximately 8%, or $400, from their state income taxes (because up to $5,000 per married household is tax-deductible per child). Virginia and the District have different rules, but both do allow tax deductions for contributions to their 529 plans."

Jeff also warns that for some families, it might be best to not use this money for Landon tuition: "Let's say a family is already contributing enough to get the maximum state income tax deduction. In this case, it is generally better to let the money grow for more years and not spend it until college. This is because by delaying spending the money, it can continue to grow tax-free."

As with all issues related to tax matters, each family's circumstances are unique. We urge you to consult a financial advisor to review how the recent changes in the tax law might affect your family. In some cases, the changes may be quite favorable — if you know how to take advantage of them.