Originally shared on Linkedin
In many states you can use 529 funds for K-12 private school tuition. And by routing payments through a 529 first you can capture a state tax deduction on spending you were going to do anyway.
I’ve noticed so many parents paying private school tuition are leaving free money on the table every year. And it’s all because of a simple sequencing mistake.
Here’s what I mean.
Let’s say you live in Pennsylvania and have two kids in K-12 private school. Tuition is $30,000 per year per kid.
You’re probably writing a check directly from your bank account. Straightforward. Simple. And quietly costing you $1,228 per year in state tax savings you didn’t have to give up.
Here’s a better approach.
The federal limit for using 529 funds for K-12 expenses was bumped up to $20,000 per student per year as of 2026.
So instead of paying tuition directly, first deposit the funds into each child’s 529 Plan. Then pay the tuition from the 529. That’s it.
PA allows you to deduct 529 contributions from your state taxes, and because there’s no minimum holding period before using the funds for qualified K-12 expenses, you’ve effectively turned a routine tuition payment into a state tax deduction.
Here’s the simple math.
- $20,000 per child (the federal limit) × 3.07% PA state tax rate = $614 back per child
- Two kids = $1,228 per year. Every year. For spending you were going to do anyway.
Not life-changing money. But $1,228 in annual savings that compounds over a decade of private school tuition is worth knowing about — especially when capturing it only takes a few steps.
Note, every state has different rules. Some don’t allow K-12 deductions at all. Some have contribution limits that affect the math. Check your state’s specific rules or ask an advisor. If you’re a high earner in a high-tax state, your numbers could look even better than the Pennsylvania example above. The higher your marginal state rate the more this matters.
This is one of those optimizations that looks small in isolation but is exactly the kind of thing that adds up when you’re navigating the squeeze years — private school, mortgage, family life, and trying not to compromise what you’re building for the future.
If you’re navigating the squeeze years I’d be curious what financial questions are keeping you up at night.
Get more content like this:
- Follow me on LinkedIn where I post observations like this twice a week
- Subscribe to my Substack for longer pieces on income investing and building a life funded by portfolio income, subscribe to my newsletter. No paywalls.
Disclosures: For educational purposes only. Not investment advice.