HB 18-1221

HB 18-1221, a Colorado bill that has been signed into law, allows parents and guardians to use money from their 529 college savings accounts for kindergarten through twelfth grade educational expenses. This means they can now claim tax deductions on contributions made towards these accounts when the funds are used for K-12 schooling costs, not just for higher education. The bill ensures that using the account for elementary and secondary school won’t result in any unexpected taxes or penalties. It benefits families who want to use their 529 savings flexibly for a child's entire educational journey from early childhood through college.

Official Summary

Current law allows contributions to a qualified state tuition program, also known as a 529 account, so long as the distributions are used for qualified higher education expenses (and some additional exceptions), but not for kindergarten through twelfth grade school expenses. The federal 'Tax Cuts and Jobs Act', which became law in December 2017, added distributions for kindergarten through twelfth grade expenses as qualified distributions thereby allowing, on the federal level, income tax-free distributions for elementary and secondary education expenses in addition to already authorized income tax-free distributions for higher education expenses. The bill makes similar changes to Colorado law to allow contributions to qualified state tuition programs for kindergarten through twelfth grade expenses thereby allowing a taxpayer to claim a deduction for such contributions and clarifying that such expenses are qualified distributions, ensuring that a taxpayer does not encounter tax recapture of any claimed deductions when such contributions are distributed for kindergarten through twelfth grade school expenses. (Note: This summary applies to this bill as introduced.) , Read More