Updated: Final tax bill adds K-12 private, Catholic schools to 529 education savings plans

The final version of the new federal tax bill, approved by the House and Senate Wednesday, includes a revolutionary change to 529 education savings accounts, adding K-12 private and Catholic schools. Senate Democrats removed a provision allowing parents to save money in 529s for the 1.8 million Americans who home school.

“My amendment expands 529 so now you can not only save to go to college, you can also spend from your 529 plan on K-12 education expenses — for public schools, for private schools, for religious schools… — up to $10,000 a year,” U.S. Sen. Ted Cruz, R-Texas told Fox News Dec. 6.

The amendment, which takes effect Dec. 31, 2017, is part of the final bill released from the House-Senate Conference Committee late Friday. The full Congress approved the bill this week though Democrats pushed to strip the bill of the provision helping homeschoolers.

State tax advantages: Many states, including Michigan, provide further tax breaks for families investing in 529 education accounts. For example, a family earning $100,000 per year that invests $10,000 in a 529 would see an immediate $425 in tax savings. Use this calculator to determine your immediate savings.