Features and Benefits
Important Federal and State Tax Updates
On December 22nd, 2017, new federal tax reform legislation was signed into law. The law amends Section 529 of the Code to permit withdrawals from 529 Plan accounts up to $10,000 per year per student (in the aggregate across all Qualified Tuition Programs for that student) for tuition expenses in connection with enrollment and attendance at an elementary or secondary public, private or religious school (K-12 Tuition). The law also permits rollovers from a 529 Plan account to a Qualified ABLE Program account (ABLE Rollover Distribution) up to the annual $15,000 contribution limit.
On December 20th, 2019, the SECURE Act was signed into law. The SECURE Act amends Section 529 of the Code to permit withdrawals to pay for expenses for apprenticeship programs registered and certified with the Secretary of Labor under the National Apprenticeship Act (Apprenticeship Program Expenses) and to pay principal and interest on certain qualified education loans (Education Loan Repayments) for a beneficiary or any of the beneficiary’s siblings. The loan repayment provisions apply to repayments up to a lifetime maximum of $10,000 per individual. The effective date of the SECURE Act is January 1st, 2019.
Montana Taxation of Distributions for K-12 Tuition, Apprenticeship Program Expenses and Education Loan Repayments
The Montana Department of Revenue (MDOR) has stated that despite changes made to Section 529, withdrawals used to pay K-12 Tuition, pay Apprenticeship Program Expenses, or make Education Loan Repayments are considered a non-qualified withdrawal for Montana state tax purposes. Funds used to pay for these expenses may subject you to the Montana state recapture tax on contributions previously deducted and require your Beneficiary to include the earnings in their gross income.
The MDOR has not provided guidance on the State tax law treatment of ABLE Rollover Distributions.
Montana taxpayers should consult their tax advisors before making a contribution or withdrawal for K-12 Tuition, Apprenticeship Program Expenses, Education Loan Repayments, or initiating an ABLE Rollover Distribution. Achieve Montana account owners in other states should seek guidance from the state in which they pay taxes.
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