16 states might tax federally approved education plans
(The Center Square) – Families in 16 states could face state taxes and penalties for using what's called a "529 education savings plan" to pay for expenses approved under federal law, according to a report from the American Legislative Exchange Council. Congress established the 529 education savings plan in 1996 through the Small Business Job Protection Act. The 529 plan allows a family to save for qualified education expenses, including certain costs associated with K-12 education and higher education, according to Fidelity. The families save money through tax-deferred investments. ALEC released its report Wednesday, "Building a Better Path to Education: State 529 Laws After the Working Families Tax Cuts," examining differences between federal rules governing qualified education expenses and state policies. According to the report, 11 states - California, Colorado, Delaware, Hawaii, Illinois, Michigan, Minnesota, Nebraska, New York, Oregon and Vermont - do not allow 529 funds to cover any K-12 expenses under their state rules. Arkansas, Kentucky and Louisiana allow funds to cover K-12 tuition, but only up to $10,000 annually. Indiana and Montana allow K-12 tuition expenses up to $20,000 annually but do not permit the full range of expenses authorized under federal law. The Center Square reached
