Kentucky Expands State 529 Accounts to Allow K-12 Tuition
Starting July 14th, Kentucky residents will be able to use funds in their Kentucky Education Savings Plan Trust (KESPT) to pay K-12 tuition costs tax-free. KESPT is the state-run education savings program that allows parents to grow their money tax-free if it is used for K-12 tuition or higher education expenses. (source)
In the December 2017 federal tax bill, Congress expanded these accounts, typically called 529 accounts for their section of the tax code, to allow for K-12 tuition expenditures. Due to the technical way that change was implemented, some states have had to enact legislation to align their state tax code with the federal change. Kentucky did that this past legislative session, and the change will go into effect this month. Kentucky is the 26th state to allow for K-12 tuition costs to be paid tax-free from 529 accounts.
9 additional states have no income tax, resulting in the same practical effect.
20 of those states offer a deduction on state income taxes for contributions to a 529 account. The value of the deduction can range anywhere from $50 to almost $1,000, depending on the tax rate and deduction limit.