How will the 2021 tax law change the way I save for my kids’ education?

While funds from tax-advantaged 529 education savings plans have been used in the past to finance college education, they can now also be used toward paying for the cost of a private school education from kindergarten through 12th grade. Any individual can contribute up to $15,000 per year, or $30,000 per year for a couple, and avoid paying gift tax.

If you have relatives with disabilities, talk to your preparer about the new ability to transfer funds, tax-free, from 529 plans into tax-advantaged ABLE accounts. If, for instance, you have unused funds from one child’s 529 plan, up to $15,000 can now be transferred each year to another child’s ABLE account without penalty. (Low-income, disabled savers also can now qualify for the Savers Credit when they make qualified contributions directly to ABLE accounts.)

However, some other education-related tax breaks have changed. The deduction for tuition and fees, for example, worth up to $4,000, has been eliminated. Check with your accountant about the impact on your education savings and financing strategies.