Lutheran School in Wisconsin

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I read recently that this will be bigger than school choice or vouchers. I'm not sure that's entirely true, since vouchers give money to private schools. However, the new tax plan will allow parents to spend money in college savings plans at private schools, which can create some tax breaks.

The basic idea is that you can invest money and take it out, tax-free, to use for college. When it transitions to elementary schools next year, many parents will be taking the money out early. However, 529 plans also have fees. The investments aren't guaranteed, either, so you could lose money. However, if you started saving right when the kids were born and you live in a high-tax state, this might help pay for grade school. Since I live in Florida and don't already have a 529, this new tax break won't help me pay for much. And if I were to try to pass money through quickly, I'd probably end up paying more in fees than I'd save, but I'll have to look into it. In all honesty, I'd rather pay taxes than fees to some rookie investor if it's going to come out about the same.

 

If you're rich and live in a high-tax state, you could throw a whole decade of private school money in one of these, let it ferment, and then take out what you need as you need it, without paying taxes on the income. So I'd say this new tax break probably benefits the rich more than the middle class, but I could be missing something. I could see it working if the initial investment reduces my taxable income. So, let's say I put $10,000 into the account during the year, only to pull all of it right back out to pay for school. If that reduces my income by $10,000 for the year, then it's worth doing. But this isn't the case, so I won't bother.