Should You Spend 529 Funds on K-12 Private School?

Should You Spend 529 Funds on K-12 Private School?

According to the College Board,15 years from now (that’s 2033!), a private four-year college degree will cost $323,900. Gulp. Some families have been saving in 529 accounts that can be used for qualified educational expenses like higher education tuition, room and board, books, and computers. The benefit of a 529 is that educational savings grows tax-exempt as long as the funds are used for qualified expenses.

The tax law change for 529 savings plans now includes up to $10,000 per year in K-12 private education as a qualified expense, but don’t lose sight of the goal of college funding.

  • The change is good for those who have saved a significant amount in 529 accounts over a long period of time.
  • It is also an option for grandparents who made a large contribution at the beginning of the child’s life.
  • This isn’t good if you are barely funding the 529 account because the account likely needs time for growth potential. We don’t want to cannibalize the college savings. Take a look at other ways to cover K-12 education, like cash flow, grants, or in-year cash gifts, or even less-expensive options like parochial school.

Grandparent gifting as an estate planning or tax planning tool.

Gifting to 529 accounts early in a child’s life serves the dual purpose of removing assets from the grandparent’s future estate and allowing the growth on those assets to be tax-free.  This change makes the option even more appealing, because parents can use the funds for more than just college.

Time 529 withdrawals in light of financial aid applications.

529 funds are included in the calculation of a family’s contribution on the Free Application for Federal Student Aid (FAFSA). In some circumstances, using 529 funds for private school tuition in high school could improve the outcome of a FAFSA submission.

Whether you’re just starting a family, have school age kids, or are a grandparent looking for ways to help with education expenses while also protecting your tax status, we encourage you to start the 529 Savings Plan conversation with your financial planner today.


As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. Investors should consider, before investing, whether the investor’s or the designated beneficiary’s home state offers any tax or other benefits that are only available for investment in such state’s 529 savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors. The tax implications can vary significantly from state to state.

Raymond James does not provide tax services. Please discuss these matters with the appropriate professional.Any opinions are those of Traci Meakem, CDFA® and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of strategy selected.