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More Uses for Your 529 Plan: SECURE Act Changes
Congress has passed the SECURE Act which was signed into law on December 20, 2019 and features important federal changes expanding the use of 529 plans. The Act makes changes to IRS Code § 529 by expanding the definition of Qualified Higher Education Expenses (QHEE) for 529 plans and is effective for distributions made after December 31, 2018.
The definition of 529 plan QHEE will include expenses for fees, books, supplies, and equipment required for the participation of a designated beneficiary in an apprenticeship program registered and certified with the Secretary of Labor under the National Apprenticeship Act.
The definition of 529 plan qualified higher education is also expanded to include amounts repaid principal and interest on any qualified education loan of either a 529 plan designated beneficiary or a sibling of the designated beneficiary. To be a qualified expense, the loan repayment amount for an individual is subject to a lifetime limit of $10,000.
Only the federal tax treatment of expenses for apprenticeships and the repayment of student loans was changed by the SECURE Act. Wisconsin taxpayers should be aware that it has not yet been determined if Wisconsin law conforms to the federal legislation. As a result, it is important for Wisconsin taxpayers to consult their tax advisors before (1) making a withdrawal for apprenticeship and student loan payments or (2) making a contribution to a 529 plan which they intend to ultimately withdraw for apprenticeship or student loan payments. State tax treatment varies by state. Taxpayers who reside or have income in other states should also consult with a qualified tax advisor before taking any such actions.