Tax law changes
State Tax Change
Effective August 28, 2021 certain Apprenticeship Program expenses and Loan Repayments, as defined below, will be treated as Qualified Education Expenses for purposes of Missouri state income tax; accordingly, effective for distributions taken beginning August 28, 2021, any earnings used for the following expenses will not be subject to Missouri state income tax:
* Apprenticeship Program expenses. Fees, books, supplies, and equipment required for the participation of a designated beneficiary in an apprenticeship program registered and certified with the Secretary of Labor under Section 1 of the National Apprenticeship Act (29 U.S.C. 50).
* Loan Repayments. Principal or interest on any qualified education loan (as defined in section 221(d) of the Internal Revenue Code) of the designated beneficiary or a sibling of the designated beneficiary, up to a lifetime limit of $10,000 per individual. Note, if you make an education loan repayment from your Account, Section 221(e) (1) of the Internal Revenue Code provides that you may not also take a federal income tax deduction for any interest included in that education loan repayment.
Account Owners who take a withdrawal for these purposes in tax year 2021 prior to August 28, 2021 should consult their tax advisor for further guidance. Account Owners in states other than Missouri should seek guidance from the state in which they pay income taxes. The taxpayer has the responsibility to maintain records to document the use of funds associated with these provisions, and any reporting that may be required.
Using Your 529 to Pay for K-12 Expenses & ABLE Rollovers
Recent changes to federal law are expanding the 529 savings program, allowing Missouri families to better utilize this important program. These changes include the following new provisions related specifically to 529 plan accounts, beginning with the 2018 tax year:
* Missouri taxpayers can use MOST 529 assets to pay for K-12 tuition up to $10,000 per year per student without state tax consequences. State tax treatment of K-12 withdrawals is determined by the state(s) where the taxpayer files state income tax. If you are not a Missouri taxpayer, please consult with a tax advisor.
* The changes to the federal law allow rollovers from 529 plans to ABLE plans without federal tax consequences. Missouri statute may allow for rollovers of MOST 529 assets to ABLE accounts without Missouri state tax consequences. We suggest MOST 529 account owners who are residents of other states consult with a tax advisor about their state laws.
MOST will continue to keep you updated on the implementation of these changes. We encourage you to consult a qualified tax advisor about your personal situation.