There is a great stir under the new Trump tax plan with regard to deductibility of yeshiva tuitions. And it is marvelous for those who send their children to private schools.
Taking a step back, understand that 529 plans in New York are a wonderful creation. It is not only a simple vehicle for accumulating money for children’s college tuitions, but a great income tax planning tool as well, especially for New York State, which has one of the highest income tax rates in the union.
Under the Trump tax plan, the use of 529 plans has expanded from simply for the purpose of college and graduate, to include all private school tuitions as well, including yeshiva tuitions.
KNOW THIS, pay your yeshiva tuitions directly to the school, and there is no deduction. Work with an estate attorney, and tens of thousands of dollars can be saved each year. Under the new plan, a married couple can transfer $20,000/year in total to 529 plans, and can get an income tax deduction for the amount of the contribution.
Grandparents can get in on the savings as well. Each grandparent can contribute up to $10,000/year to 529 plans and receive an income tax deduction for said contribution.
There is also a gift and estate tax or Medicaid planning opportunity to contribute to 529 plans by donating $75,000/per child every five years, gift and estate tax exempted. If you have ten children/grandchildren, you can remove from your estate $750,000 without paying any gift or estate tax.
Under the new tax plan, forget about limiting yourself to gifting $15,000 per child/grandchild, that’s passe for most of America, enjoy gifting in amounts that you want. Do you want to pay for your grandchild’s wedding, down payment for a new home? Speak with your attorney about gifting without limitations, without having to pay the 55% of federal and NY gift and estate tax.
Now is a great time to plan and to gift money in trust for the next generations.
Take advantage of it while you can.
Lenore has been practicing Trust and estate/elder law for 25 years. She has her LLM masters in Taxation, and has offices in New York and New Jersey. You can contact her via telephone at (516)569-4671 or by email at Ldavis@lenoredavis.com.