With the IRS 2017 new allowance for using $10,000 annually for private K-12 education, does anyone know if this applies only to US elementary/high schools? Or if my child is attending a private high school out of the US, can the 529 funds be used for that?
Hmm. Interesting question.
It would seem from IRS Pub. 970 that any secondary school would be eligible, and so international would not be a problem. See p.50 under “Eligible elementary or secondary school” here: https://www.irs.gov/pub/irs-pdf/p970.pdf
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However, this is merely IRS guidance and so does not absolutely settle the issue. Note just above that section that for postsecondary education, only certain foreign institutions are eligible.
Thank you…I’m going to check with the administration at my daughter’s school in Spain, where she is attending high school
I doubt that an administrator at a school in Spain will be qualified or willing to give advice on U.S. tax law, especially on a new provision of the law. And the new allowance is for 2018, not 2017.
It’s actually an international school, and the administrator is checking on it as he came from the US. I did want to find out about 2018 as her private school fees at the International school she’s attending in Barcelona are high, so any payments we can make tax free would help. Thank you.
Even if you use the 529 funds for a non-qualified purpose, only the earnings portion of any distribution is subject to income tax (plus a 10% additional tax, unless an exception applies). If there hasn’t been much growth, there won’t be much (if any) tax owed, especially if the distribution from the 529 account is made payable to your daughter and she has no or little other taxable income.
Thank you. I don’t understand the part about paying directly to her…take the distribution out put it in her bank account…then pay the school via her bank account? She’s not working so she doesn’t even file a tax return.
Generally, a 529 account owner can request that a distribution from the account be made payable to either the account owner, the beneficiary/student, or the school. There are tax implications based on your choice if all or any part of a distribution is used for a non-qualified expense. The earnings portion of a non-qualified distribution that is made payable to the beneficiary or the school will be considered taxable income for the beneficiary.