The CollegeCounts 529 Fund Direct Plan Program Disclosure Statement has been updated to include the following:
- Certain sections of the Alabama income tax statute refer to definitions in Code Section 529, as amended, including the definition of “Qualified Higher Education Expenses.”
- For years after 2017, amendments to Code Section 529 treat withdrawals for tuition in connection with enrollment or attendance at an elementary or secondary school, whether public, private or religious, with a limit of $10,000 per year, per child collectively from all 529 plans to be “Qualified Higher Education Expenses.”
- Consequently, a Designated Beneficiary may be able to use the amounts in a Plan Account to pay for K-12 Tuition Expenses (as defined in the Program Disclosure Statement) without incurring adverse tax consequences. However, the Act (which has not been amended since adoption of the Code Section 529 amendments referred to above) only covers expenses at “eligible educational institutions.” The definition of this term in Code Section 529 does not appear to cover K-12 schools, although Internal Revenue Service Publication 970 provides that an “eligible educational institution” “can be either an eligible postsecondary school or, for amounts paid from distributions made after December 31, 2017, an eligible elementary or secondary school.” Publication 970 does not have the same authority as Code Section 529.
The Program recommends that taxpayers seek tax advice from an independent tax advisor with respect to their ability to use the Program to pay K-12 Tuition Expenses without incurring adverse tax consequences.
Here are links to several informational resources. Please note these are external sites and the information has not been verified by the Program or Program Manager:
Internal Revenue Service
IRS Publication 970
Alabama Department of Revenue
Alabama529 Savings Plan FAQ