On Friday night, the United States Senate passed their version of the Tax Cuts and Jobs Act, better known as tax reform. Only one additive floor amendment made it into the bill.
Senator Ted Cruz (R-Texas) offered an amendment to make 529 education savings accounts even more useful than today. 529 accounts up until now have been used exclusively for college tuition and expenses. The Cruz amendment expands the use of 529 dollars for two additional purposes–tuition for students in K-12 private and parochial schools, and costs related to homeschooling a child. Up to $10,000 per year per child can be distributed for these purposes.
If the Cruz amendment makes its way into the final bill (and there is nearly identical language in the House version, so there is a good shot of this), the game will have changed on school choice. Parents can start saving right away for private or parochial school, or for homeschooling expenses, in a 529 plan when a child is born. That money can grow tax-free for years to pay for things like Montessori school, Catholic high school, or home schooling networks. With a tax deductible component in most states, parents will get an immediate tax benefit, and then further tax relief in the form of tax-free growth.