Facts:
- Contributions to a Virginia (VA) 529 are tax-deductible (on VA taxes) and grow tax-exempt (on federal and state taxes) if withdrawals are spent on educational expenses for kindergarten thru college.
- There is no limit on how many 529s a VA resident may have and they may have more than one per beneficiary/student.
- VA taxpayers may deduct contributions up to $4000 per 529. Contributions to a 529 over $4000 in a year may be “rolled over” and deducted on future VA taxes. For example, an $8000 contribution could result in a $4000 deduction on this year’s taxes and $4000 on next year’s. Conversely, a person could open 2 x 529s, contribute $4000 to each and deduct the entire $8000 this year. They could also contribute $4000 to 3 x 529s and deduct $12,000, etc.
- 529 owners may withdraw up to $10,000 per beneficiary/student for kindergarten - 12th grade private school expenses in 2025. That amount grows to $20,000 in 2026, which should be helpful to those who pay non-Catholic tuition rates or have children in Catholic high schools. (There is no annual limit on how much can be withdrawn for college.)
- There is also no restriction on how long money has to remain in a Virginia 529. For example, a person could make a contribution and withdraw that money a week later for K-12 tuition or 20 years later for college.
Knowing the facts above, there are several scenarios a STM family may want to consider or discuss with a tax professional:
In December 2025: a family could open one or multiple 529s and contribute up to $4000 each to maximize the tax deduction (i.e., $4000 x the number of 529s). If a family does not have “extra” money, they could contribute as much as they can and withdraw the same amount (up to $10,000 per child) prior to December 31, 2025, as long as they have spent that amount on K-12 expenses in 2025. Although there would be little long-term gain (or loss) over such a short period, it could allow a family to have up to a $4000 deduction per 529 and have the money back in their account before the end of 2025 or they leave it in the 529s to pay for 2026 tuition. If fact, because money can be sent and withdrawn from the same 529 in about 7-10 days, it is possible to contribute $4000 to 2 x 529s with the same "recycled" $4000 prior to December 31st.
In 2026, a family, which is going to pay tuition & fees via FACTS anyway, could first contribute (up to $4000) per 529 and withdraw it prior to FACTS transferring the amount owed. With 2025-2026 tuition being $10,000 to $13,000, a family could have an $10,000 - $13,000 tax deduction spread over 3-4 x 529s. With a little planning, a family could likely deduct every dollar spent on Catholic school tuition by having it pass through a 529 first.
Resources:
Invest529 (formerly Virginia 529)
529 FAQs (from Bishop O’Connell’s Website)
This is for informational purposes only and does not constitute legal, tax, or accounting advice. Please consult a qualified legal or tax professional for your specific situation.