CPAs and SECURE 2.0

Is the $ 35,000 limit per 529 owner or per beneficiary ? This would certainly be lucrative for a 529 owner with multiple beneficiaries .

Primer on 529 Plans Before jumping to this Roth IRA rollover provision , consider first taking advantage of all the 529 benefits : 1 . There is no federal deduction for the contributions to the 529 Plan . 2 . There is no California deduction for the contributions to the 529 Plan . 3 . The withdrawals are tax-free if used to pay for eligible education expenses . a . These expenses include tuition , fees , books , supplies and equipment . The equipment includes a computer , software and internet access . This does not include a gaming computer or software for games ( unless your student happens to be a gaming student ).

4 . Room and board are eligible expenses if the student is enrolled at least half time .

For students living and eating off campus , 529 plans can be used for rent and grocery bills . The limit is up to the cost of housing per the school ’ s charges for room and board .

5 . Typically , the 529 Plan cannot be used for transportation costs , but special-needs students can use them for a broad array of expense that include transportation .

6 . Up to $ 10,000 can be used to pay student-loan debt for the beneficiary , siblings and stepsiblings .

7 . Up to $ 10,000 can be used for K-12 tuition . However , I do not recommend this because California did not confirm to this provision , so on the California tax return , the earnings portion of the distribution will be taxable plus penalty . Another consideration for leftover money in a 529 Plan is graduate school . Instead of rolling the leftover money to a Roth IRA , your beneficiary may need the funds for graduate school — be it law school , medical school , business school or even getting a

master ’ s degree in tax or accounting .

Another consideration for leftover money in a 529 Plan is transfers to other family members . There is no tax consequence if the beneficiary is changed to another family member , which is broadly defined to include spouses , first cousins , descendants and siblings .

529 Plan owners can leave the plan to others at death . Unlike IRAs and HSAs , 529 plans can exist in perpetuity . Also , unlike IRAs , there are no required minimum distributions .

For more information about 529 plans , take a look at IRS Publication 970 – Tax Benefits for Education at irs . gov / forms-pubs / about-publication-970 . Information on the California 529 Plan , known as ScholarShare529 , can be found at scholarshare529 . com .

Lawrence Pon , CPA / PFS , CFP , EA , USTCP , AEP is the owner of Pon & Associates . You can reach him at lkypon @ aol . com .

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