* Education Week on the new federal tax laws…

The Tax Cuts and Jobs Act creates a new wrinkle for 529 college savings plans, which are tax advantaged. The bill would allow parents to use them for K-12 expenses, including private school choice, as well as postsecondary costs. The bill puts a $10,000 cap on the money people can set aside for K-12 in these plans.

U.S. Secretary of Education Betsy DeVos and others have applauded the move, although DeVos said Tuesday the move has limitations. But others argue it will mainly help wealthier parents who can afford to set money aside, and those already sending their children to private schools.

In a last-minute twist, the Senate parliamentarian on Tuesday ruled that the slice of this provision that allowed 529 plan dollars to be spent on home schooling violated the chamber’s rule. The Senate and then the House voted to approve the bill without this provision covering home schooling costs.

* But Treasurer Frerichs just sent out a warning…

Families that use their Bright Start or Bright Directions college savings accounts to pay for tuition, fees or other expenses at private or parochial schools, including Catholic schools, would violate Illinois’ tax code, Illinois State Treasurer Michael Frerichs cautioned today. Frerichs also emphasized that federal tax reform did not change any of the benefits for using Bright Start or Bright Directions to save or pay for higher education.

Illinois’ tax code specifically limits tax-free growth in Bright Start and Bright Directions accounts when used for qualified higher education expenses. As such, a distribution from a 529 plan for K-12 costs is not a qualified expense for Illinois tax purposes. Families who claim the deduction could face state tax penalties if caught by a state tax auditor.

“Our analysis concludes that families who use Bright Start or Bright Directions money on elementary or high school expenses and then cite those expenditures when seeking tax relief will be in conflict with state law and could incur tax penalties if audited by state authorities,” Frerichs said.

In Illinois, the 529 Bright Start and Bright Directions plans are managed by the state treasurer’s office. The recently passed federal tax package allows states to expand 529 programs to private and religious K‑12 tuition expenses in 2018 and beyond. The federal legislation took effect Jan. 1 and could affect tax filers in 2019.

Here is how the tax break works for Bright Start and Bright Directions college savers who are Illinois taxpayers: Contributions to the accounts reduce a taxpayer’s Illinois adjusted gross income up to $10,000 for individuals and $20,000 for married couples filing jointly. At the federal level, the earnings generated within Bright Start and Bright Directions are not subject to federal income taxes while they accumulate. Also, distributions from these plans are not subject to federal or state income taxes when used for qualified higher education costs such as tuition, mandatory fees, certain room and board, computers and required supplies.