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.

October 2025 Newsletter

By Sarah Bolton • October 3, 2025
Our regularly updated newsletter provides timely articles to help you achieve your financial goals. Please come back and visit often. Feature Articles Enhanced SALT Tax Break Will Help Many Homeowners 2 Important Changes for Businesses under the New Tax Law Tax Breaks for Medical Expenses Tax Tips Can Your Business Benefit from the WOTC? Say Goodbye to Paper Checks Dependent Care Flexible Spending Accounts for Your Business

October 2025: Upcoming Tax Due Dates

By Sarah Bolton • October 3, 2025
October 15 Individuals: File a 2024 income tax return (Form 1040 or Form 1040-SR) if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States and Puerto Rico). Pay any tax, interest and penalties due. Individuals: Make contributions for 2024 to certain existing retirement plans or establish and contribute to a SEP for 2024 if an automatic six-month extension was filed. Individuals: File a 2024 gift tax return (Form 709) and pay any tax, interest and penalties due if an automatic six-month extension was filed. Calendar-year bankruptcy estates: File a 2024 income tax return (Form 1041) if an automatic six-month extension was filed. Pay any tax, interest and penalties due. Calendar-year C corporations: File a 2024 income tax return (Form 1120) if an automatic six-month extension was filed. Pay any tax, interest and penalties due. Calendar-year C corporations: Make contributions for 2024 to certain employer-sponsored retirement plans if an automatic six-month extension was filed. Employers: Deposit Social Security, Medicare and withheld income taxes for September if the monthly deposit rule applies. Employers: Deposit nonpayroll withheld income tax for September if the monthly deposit rule applies. October 31 Employers: Report Social Security and Medicare taxes and income tax withholding for third quarter 2025 (Form 941) and pay any tax due if all of the associated taxes due weren’t deposited on time and in full. November 10 Individuals: Report October tip income of $20 or more to employers (Form 4070). Employers: Report Social Security and Medicare taxes and income tax withholding for third quarter 2025 (Form 941) if all of the associated taxes due were deposited on time and in full.

Dependent Care Flexible Spending Accounts for Your Business

By Sarah Bolton • October 3, 2025
Employers seeking to offer family-friendly benefits may want to consider flexible spending accounts (FSAs) for dependent care. These FSAs let employees make pre-tax contributions through payroll withholding to help cover eligible expenses. Because of the major tax bill enacted on July 4, 2025, the annual contribution limit, currently $5,000, will rise to $7,500 in 2026. FSA contributions reduce employees’ income tax and payroll tax and employers’ payroll tax. Withdrawals used to pay qualified expenses are tax-free. These include expenses for care for a child under age 13 or another dependent unable to care for themselves due to physical or mental limitations. Contact the office with questions.