The Tax Cuts and Jobs Act passed the U.S. House of Representatives last week and is currently under review by the Senate Finance Committee. If passed by the Senate and signed by the president, the bill would allow tax breaks to families that send their children to private schools.
There are numerous private educational institutions in the East Bay, which vary in annual tuition. Maybeck High School in Berkeley, for example, costs approximately $37,000 annually, whereas The College Preparatory School in Oakland costs approximately $42,000. Representatives from these schools could not be reached for comment.
The bill would alter 529 plans — tax-deferred plans intended to encourage savings for higher education — to allow individuals to take out $10,000 each year for private school tuition without any tax on the withdrawal.
“Mr. Trump’s unprecedented pitch for deducting the cost of private-school tuition, currently in the House tax bill, would overwhelmingly benefit wealthy families … as Republican leaders seek to eliminate health insurance for poor households,” said Bruce Fuller, professor at the UC Berkeley Graduate School of Education in an email.
The 529 plan is one of two existing programs outlined in the Internal Revenue Code that allow people to save for education. The other is the Coverdell Education Savings Account, which allows people to deposit $2,000 per year and can be used for kindergarten through 12th grade expenses, for both public and private education.
Under this provision, however, new contributions to Coverdell Education Savings Accounts would be prohibited, and 529 plans would account for kindergarten through 12th grade education expenses, in addition to undergraduate and postgraduate expenses.
Andrea Feirstein, founder and managing director of AKF Consulting Group, which assists state governments with the college savings industry, said that although she doesn’t know what the long-term impact of the bill will be, she referred to it as “tax-sweetener” for high-income families who can already afford private schools.
In addition to several new tax deductions in the bill, many existing ones would also be rescinded — including a tax benefit that allows low- and middle-income students to deduct up to $2,500 of their student loan interest annually.
Student activist Rebecca Gonzalez, who was the youngest delegate for Hillary Clinton at last year’s Democratic National Convention, took to Twitter to voice her frustrations over the potential rescission of this student loan deduction.
Student loan interest won’t be deductible under the new tax bill.
But private school tuition will be.
RT if you think this is unfair.
— Rachel R. Gonzalez (@RachelGonKCMO) November 18, 2017
“(The act) makes it harder for poor people to go to college, and I don’t think that’s right,” Gonzalez said. “This is a tax cut for the rich, even though Republicans are painting it as a tax cut for the middle class.”