Invest in Your Kids' or Grandkids' Future with Help from the Tax Code

Sarah B

If you’re thinking about helping a child or grandchild pay for school, you’re not alone, and you’re not without help. While families have always saved for education, Section 529 plans have made it easier and more tax-efficient.


Tax Advantages

With a 529 plan, your contributions grow tax-deferred, and no taxes are due when the money is used for qualified education expenses. These include postsecondary school expenses such as tuition, mandatory fees, books, supplies, computer equipment, software, internet service and, generally, room and board (for students enrolled at least half-time). Contributions aren’t deductible for federal purposes, but many states offer tax breaks or matching grants for contributions.


Contributions to a 529 plan may be shielded from gift tax by the annual gift tax exclusion, which for 2025 is $19,000 per recipient ($38,000 for joint gifts by a married couple). You can even choose to front-load five years’ worth of annual exclusion gifts into a 529 plan contribution in a single year. For instance, you and your spouse can contribute up to $190,000 per recipient in 2025, exempt from gift tax. Any excess contributions can potentially be made gift-tax-free under the federal gift and estate tax exemption ($13.99 million in 2025).


529 Plans Gain Flexibility

Before the Tax Cuts and Jobs Act (TCJA), the tax exclusion for qualified expenses was strictly limited to postsecondary education. The TCJA expanded this tax break to $10,000 of tuition per year at an elementary or secondary public, private, or religious school.


More recently, thanks to the SECURE Act, you may use up to $10,000 in a 529 plan to repay the beneficiary’s student loans, plus another $10,000 to repay student loans held by the beneficiary’s siblings. It also allows 529 funds to pay for apprenticeships (for example, classroom instruction at a community college).


In addition, under SECURE 2.0, from 2024 forward, up to $35,000 (lifetime limit) in unused 529 plan funds can be rolled into a Roth IRA for the beneficiary, subject to various rules.


Also, changing how financial aid is calculated on the Free Application for Federal Student Aid (FAFSA) form may help grandchildren. Gifts from grandparents to 529 accounts no longer affect the allowable aid.

Finally, legislation has been proposed that would allow tax-free 529 plan distributions for even more types of education-related expenses. Contact the office for the latest information.


Build Security for Future Generations

Given the high costs of higher education and many private elementary and secondary schools, planning is more important than ever. A 529 plan can be a powerful, tax-efficient tool to help you save for education expenses. Contact the office with questions about 529 plans.

January 2026 Newsletter

By Sarah Bolton • January 7, 2026
Our regularly updated newsletter provides timely articles to help you achieve your financial goals. Please come back and visit often. Feature Articles Can You Claim a Tax Deduction for Tips or Overtime Income? Businesses: Act Soon to Take Advantage of Clean Energy Tax Incentives Make Smart Choices With a Sudden Windfall Tax Tips 2026 Tax Law Changes for Individuals Heavy Tax Breaks for Heavy Business Vehicles More Taxpayers May Qualify for the Casualty Loss Deduction

January 2026: Upcoming Tax Due Dates

By Sarah Bolton • January 7, 2026
January 15 Employers: Deposit nonpayroll withheld income tax for December 2025 if the monthly deposit rule applies. Individuals: Pay the fourth installment of 2025 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding. February 2 Employers: File 2025 Form W-2 (Copy A) and transmittal Form W-3 with the Social Security Administration. Employers: File a 2025 return for federal unemployment taxes (Form 940) and pay any tax due if all the associated taxes weren’t deposited on time and in full. Employers: Report Social Security and Medicare taxes and income tax withholding for the fourth quarter of 2025 (Form 941) if all of the associated taxes due weren’t deposited on time and in full. Employers: Provide 2025 Form W-2 to employees. Businesses: Provide 2025 Form 1098, Form 1099-MISC (except for those with a February 18 deadline), Form 1099-NEC and Form W-2G to recipients. Individuals: File a 2025 income tax return (Form 1040 or Form 1040-SR) and pay the tax to avoid penalties for underpaying the January 15 installment of estimated taxes. February 10 Employers: File a 2025 return for federal unemployment taxes (Form 940) if all associated taxes due were deposited on time and in full. Employers: Report Social Security and Medicare taxes and income tax withholding for the fourth quarter of 2025 (Form 941) if all associated taxes due were deposited on time and in full. Individuals: Report January tip income of $20 or more to employers (Form 4070). 

More Taxpayers May Qualify for the Casualty Loss Deduction

By Sarah Bolton • January 7, 2026
Starting in 2026, personal casualty loss deductions will no longer be limited to federally declared disasters. Certain state-declared disasters will also be eligible. For a disaster to qualify, the governor (or D.C. mayor) and the U.S. Treasury Secretary must agree that the damage is severe enough to apply these rules. Now more taxpayers affected by natural disasters or by fires, floods or explosions, regardless of the cause, may qualify.  Note that taxpayers can still claim personal casualty losses not attributable to federally or state-declared disasters, but only to the extent of any personal casualty gains. Need guidance? Contact the office for help.