Maximizing the Benefits of 529 Plans for Private School Tuition

Cristina Wiebelt-Smith

For families invested in providing a quality Catholic education, the cost of tuition is often a significant consideration. Fortunately, a powerful financial tool can make these expenses more manageable while offering tax benefits: the 529 plan.

What is a 529 Plan?

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education expenses. While traditionally associated with college savings, federal tax laws now allow families to use 529 plans to pay for up to $10,000 per year per student in tuition for K-12 private schools, including Catholic elementary and high schools.

How Does it Work for Missouri residents?

Missouri families enjoy additional benefits when contributing to a 529 plan. Contributions to any 529 plan are tax-deductible on state income taxes—up to $8,000 per year for individuals or $16,000 for married couples filing jointly.

For example, if a married couple contributes $10,000 to a MOST 529 plan and uses $8,000 of that to pay for private school tuition, they will still receive a $10,000 deduction on their Missouri state taxes. It’s a simple yet impactful way to save on taxes while supporting your child’s Catholic education.

Contribution Limits

Although Missouri offers state tax deductions for contributions up to $8,000 (or $16,000 for married couples), you can contribute much more to a 529 plan. The lifetime contribution limit for a Missouri 529 plan is $550,000 per beneficiary. While you may not need to save that much for K-12 tuition, these plans are an excellent long-term savings vehicle if you plan to fund both private school and college expenses.

Benefits of Using a 529 Plan for K-12 Tuition

1. Tax-Free Growth: Any earnings in a 529 plan grow tax-free, meaning you won’t pay federal or state taxes on investment gains while the money is in the 529 plan. You also won't pay taxes when you take distributions to pay for qualified educational expenses, which includes K-12 tuition.

2. State Tax Deduction: Contributions reduce your Missouri taxable income, providing immediate tax savings.

3. Flexibility: Funds can be used for tuition at private elementary schools, high schools, and colleges, giving families the flexibility to plan for their child’s entire educational journey. Funds can also be transferred to another family member if one child doesn't need the money. 

4. 
   

How to Get Started

If you’re new to 529 plans, opening an account is straightforward. You can visit Missouri’s MOST 529 website to create an account and set up automatic contributions. Even small, consistent contributions can add up over time and make a big difference in covering tuition costs.

Once you have a 529 plan, you can deposit the amount of your child's tuition in it to get the tax deduction. If you’ve already paid some of the tuition, you can reimburse yourself. If not, you can use it to pay the school. You can put the money in at any time during the year and reimburse yourself at any time.  

By leveraging the benefits of a 529 plan, our families can reduce the financial burden of tuition while ensuring their children receive the values-based education that Catholic schools provide.

For more information about using a 529 plan for Catholic school tuition, consult your financial advisor or CPA. For general questions, I'm happy to help as well. 

Cristina Wiebelt-Smith, CPA & Wealth Advisor 816-259-5060 cristina@gertsema.net