Friday, May 17, 2024

Kennedy introduces bill to help parents cut costs for K-12 education amid rampant inflation

by BIZ Magazine

WASHINGTON – Sen. John Kennedy (R-La.) today introduced the Inflation-Adjusted Education Investment Act to help parents afford the cost of K-12 tuition. The bill would permanently increase the amount of money that parents can withdraw from their 529 savings plans without incurring tax penalties.

“Parents know their kids best and have the right to choose the educational path that’s best for their kids. Now that raging inflation is making alternatives to government school less accessible, I’m introducing a bill to help families afford more private education options,” said Kennedy.

Kennedy’s bill raises the cap on withdrawing from a 529 plan from $10,000 to $12,000 for 2023. The increase adjusts for inflation that has already occurred under the Biden administration and is likely to occur by the end of the year. Additionally, the bill would make the new cap adjustable for inflation, beginning in 2024. Because of high inflation, it cost parents more than $11,400 in January 2023 to pay for what $10,000 purchased in January 2021.

The specific tax advantage of a 529 plan is that distributions from this savings plan are tax-free if parents use them to pay for qualified higher education expenses. The 2017 Tax Cuts and Jobs Act gave parents the freedom to withdraw up to $10,000 tax-free each year for each beneficiary and to apply the funds to qualifying K-12 expenses. Those expenses include private and religious schooling.

Text of the bill is available here.

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