• Justin Howe

Oregon Will Not Extend 529 Tax Breaks for K-12 Private Schools

The Oregon Legislature recently voted to not give parents a state tax break on money they save to pay for K-12 private schooling. The Tax Cuts and Jobs Act (TCJA) expanded 529 savings accounts to apply to private, K-12 schools but, Oregon has opted not to extend its own tax break to private K-12 education.

These traditional college savings account allowed parents to invest after-tax dollars into the account and withdraw the money tax-free to pay for college expenses. Any increase the account realized during that time is not taxed when it is withdrawn. The TCJA expanded that benefit and allowed parents to use the 529 accounts to pay for private K-12 school expenses. Oregon provides a state-level deduction up to $4,660 for married couples filing jointly for contributions to 529 accounts. This benefit will not be provided to accounts being used to pay for K-12 private school expenses. The 529 withdrawals for K-12 expenses will still receive the federal tax break on their earnings.

An Oregon taxpayer that uses a 529 account to pay for K-12 schooling will need to add back to their taxable income any amount of that K-12 distribution that received the state tax deduction. Additionally, that taxpayer would need to add any earnings from that 529 to their state taxable income. House Bill 4080 is still awaiting Governor Brown's signature.


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