Legislation Regarding 529 Accounts
Recently, Congress passed the Tax Cuts and Jobs Act, which now allows parents to use 529 college savings accounts to pay for K-12 tuition at private schools. Some states, including Colorado, allow taxpayers to claim state income tax deductions for contributions to 529 accounts.
Although the Tax Cuts and Jobs Act allows 529 account holders to use funds for K-12 tuition, that federal law does not fully parallel Colorado’s state statute governing 529 account withdrawals and deductions. Colorado law only allows withdrawals for very specific purposes, and these purposes do not include K-12 tuition. Because of this discrepancy, taxpayers who make withdrawals to cover K-12 tuition costs risk losing their state income tax deduction for contributions to their children’s 529 accounts.
There are currently two competing bills being considered by Colorado lawmakers that relate to this issue:
House Bill 18-1221: This bill seeks to align Colorado law with federal law by enabling taxpayers to use 529 funds for K-12 tuition while retaining their state income tax deduction for 529 contributions. Under this bill, people could use 529 accounts to pay for K-12 tuition without risking their state income tax deductions.
THE COLORADO CATHOLIC CONFERENCE SUPPORTS HB18-1221.
TO READ HB18-1221 CLICK HERE
House Bill 18-1209: This bill would explicitly forbid state income tax deductions for 529 contributions intended for K-12 tuition. It would also put into law that K-12 tuition does not constitute a qualified withdrawal of 529 funds. Under this bill, people could be subjected to tax penalties for using 529 accounts to pay tuition.
THE COLORADO CATHOLIC CONFERENCE OPPOSES HB18-1209.
TO READ HB18-1209 CLICK HERE
Both bills will be heard in the House Education Committee on Monday, March 5, 2018 at 1:30 in Room 112.
Please contact your State Representative and ask him/her to SUPPORT HB18-1221 and to OPPOSE HB18-1209.
To find your State Representative CLICK HERE