CEP Co-Authors Article in The Catholic Spirit
Greg Dolan, Director of Policy and Outreach for Catholic Education Partners, and Jennifer Hornyak, Associate Superintendent of Accreditation and Technology for the Diocese of Wheeling-Charleston’s Department of Catholic Schools, co-authored the following article, titled, "New Tax Law Could Offer Great Financial Opportunity in Paying Catholic School Tuition":
A new tax law passed late last year could offer a great financial opportunity for parents or guardians paying Catholic school tuition or wishing to send children to Catholic school. The law contained a provision to expand “529 accounts,” tax-advantaged savings programs formerly limited to college costs, to include K-12 expenses. 529 accounts are typically begun by parents, who name their child as the designated beneficiary, and make small investments over a long period of time. Money invested in the account grows tax-free, as long as funds are used to pay for education expenses.
Beginning in 2018, up to $10,000 in tuition at Catholic elementary and high schools is an allowable expense under both federal and West Virginia law. And it gets better – in West Virginia, taxpayers may deduct from their state taxable income any contribution they make to a 529 account. These 529 policy changes could mean more West Virginia families are able to choose a Catholic education. Before discussing the details of this opportunity and how families can use 529s, it is important to point out that 529 plans are investments and carry risk. Anyone thinking of investing in one should consult a financial advisor who can provide guidance tailored to individual situations.
How did it come to be that contributions are deductible on state taxes? Under federal law, states are the only entities that can found 529 plans. They then compete with each other for investments into their 529 savings plans. To encourage West Virginians to keep their college savings in-state, the state government allows unlimited deductions for investments in a 529 account. With last year’s change in the federal definition of what is a qualified use of 529 funds, West Virginia’s definition changed as well (some state definitions have not changed, so if you have a 529 in another state, check with your plan provider if K-12 tuition expenses are allowed). The change also applies to all existing 529 accounts.
How should Catholics in West Virginia take advantage of this new option supporting educational choice? Families who are already enrolled in Catholic schools or considering future enrollment, should talk to a financial advisor about opening an account to fund their tuition costs. The expansion of West Virginia’s 529 accounts to include K-12 expenses offers an exciting opportunity for families to access a Catholic education for their children.