Tax Deductions v. Tax-Free Growth: A Closer Look at 529 College Savings Plans Under the TCJA

Abstract

Now that investors can receive preferential federal income tax treatment when using 529 college savings plans to pay for qualified K-12 tuition expenses under the Tax Cuts and Jobs Act of 2017 (TCJA), it is important to determine whether the value of receiving and investing state income tax deductions provided for qualifying contributions made to this education savings vehicle is more beneficial than the value associated with tax-free growth, given the potential for shortened education planning time horizons.

Keywords: tax deductions, tax-free growth, 529 plans, tax cuts and jobs act

JEL Classification: H24, G11