Would a pretax 529 solve the tuition crisis

amother

Wed, Jul 26 2023, 10:59 am

Heard many wealthy families have accounts with pretax money for tuition
The biggest household expense for full tuition paying parents that can't qualify for a break. The middle class who feel poor after paying tuition

https://www.fidelity.com/529-p.....-plan

amother

Butterscotch

Wed, Jul 26 2023, 11:35 am

In NY 529's are only tax-deductible when used for post high-school education, which wouldn't help for the elementary and high school tuition challenges. Another reason to move to Lakewood (or anywhere else) lol.

STovah

Wed, Jul 26 2023, 11:44 am

529s are not “pre-tax”. They are pre-tax on a state level only, in certain states. The benefit of these accounts is mainly that the earnings in the account are not taxed. Also as an earlier poster noted, NY doesn’t allow use of 529s to cover K-12.

amother

Saddlebrown

Wed, Jul 26 2023, 11:45 am

amother OP wrote:

I didn't think 529s were pre-tax. I know some states give tax credits for 529 money but the amounts are limited.

amother

Khaki

Wed, Jul 26 2023, 12:06 pm

Maryland 529 is allowed for k-12 plus post high school. It is not pretax. It does help a little, as up to a certain income the state contributes between $250-$500 per kid per account with a lifetime max of I think $9000 per account. It also helps even if you don't get the state money as you get a tax benefit. But it doesn't help enough to really make a dent in the overall cost of tuition.

For example, I was paying full tuition for 5 kids. Assuming I got the max of $500 per kid per account (which if I'm paying full tuition, I probably make too much to get the max--but just for argument sake). We have 2 accounts--one for myself and one for my husband. That would get me a total of $2500 annual per account--2 accounts= $5000 state money. But my tuition was more like 70k, so the 5k from the state barely makes a dent in what I owe the schools.

amother

Wed, Jul 26 2023, 12:11 pm

Preschool under Kindergarten is a tax write-off same as daycare. Childcare expense.

Other ways to save:
Less hosting big shabbos meals. 3x a year we used to host every other shabbos.
buy bulk/less ready stuff keep it to Costco and less meat

Clothes, toys, books, gear, bikes, furniture -find hand me downs as often as possible.

amother

Wed, Jul 26 2023, 12:16 pm

amother Khaki wrote:

Really oy.
I thought it was an account to put money into to use as pretax or maybe its called something else ? I heard people have accounts for tuition

amother

Khaki

Wed, Jul 26 2023, 2:01 pm

Quote:

Really oy.
I thought it was an account to put money into to use as pretax or maybe its called something else ? I heard people have accounts for tuition

The schools encourage it as well as the Agudah. It's potentially free money or a nice tax benefit if you do the program. You can use the money for tuition, but it's post tax. You can only get the state money if you put in their minimum required amount into the accounts. The account also earns interest. I put the tuition money in throughout the month and pull it back out a few days before tuition is due.

amother

Saddlebrown

Wed, Jul 26 2023, 2:10 pm

amother OP wrote:

Really oy.
I thought it was an account to put money into to use as pretax or maybe its called something else ? I heard people have accounts for tuition

Fsa accounts can be used to put money in for childcare pre-tax. It can be used form babysitting, pre-school, camp under a certain age.

amother

Lime

Wed, Jul 26 2023, 2:12 pm

amother Saddlebrown wrote:

Fsa accounts can be used to put money in for childcare pre-tax. It can be used form babysitting, pre-school, camp under a certain age.

My baby goes to a babysitter that doesn’t report the income so I don’t use my FSA for it. Would be so helpful otherwise.