A few weeks ago we noted that Congress, though the 2017 Tax Cuts and Jobs Act, allowed owners of 529 education plan accounts to pay for private school tuition for kindergarten through 12th grade. Funds taken from a 529 plan to pay for private school will not be subject to federal income taxes. However, we noted that Oregon had not indicated how it would treat such withdrawals at the state level. Now we know.
The Oregon State Legislature passed House Bill 4080, which disconnects Oregon from the federal government in terms of the tax treatment of distributions from 529 plans. The Oregonian reported that taxpayers will have to add back to their taxable income those distributions used to pay for K-12 tuition that received the state income tax deduction. Also, taxpayers will need to add any earnings from that portion of the 529 account to their state taxable income.
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