Important Updates to Your College Savings Plan


As a result of federal tax law changes, language was added to Section 529 of the Internal Revenue Code providing that any reference to the term "qualified higher education expense" shall include tuition expenses for K-12 Schools. K-12 Schools are elementary or secondary public, private or religious schools.

Effective January 1, this change in the federal tax law permits Account Owners to withdraw up to $10,000 for tuition expenses from a 529 college savings account for K-12 Schools free of federal taxes. This limitation applies on a per-student basis, rather than a per-account basis. Although an individual may be the designated beneficiary of multiple accounts, that individual may receive a maximum of $10,000 in distributions free of federal tax, regardless of whether the funds are distributed from multiple accounts.

These federal tax law changes also permit transfers from a 529 account to an account in a Qualified ABLE Program made before January 1, 2026, without subjecting the transferred amount to federal income tax on earnings, provided certain conditions are met. ABLE accounts are subject to an annual contribution limit (currently $15,000). Transfers from a 529 account that cause the ABLE account to exceed the $15,000 limit will be subject to federal tax. This provision applies to 529 to ABLE transfers made after December 22, 2017.

Under current New Mexico tax law, contributions to the New Mexico 529 plans by a New Mexico individual taxpayer may be deducted for New Mexico individual income tax purposes and the earnings on such contributions may not be subject to New Mexico income tax. In certain circumstances, the amounts deducted may be recaptured in subsequent years.

By letter, the New Mexico Education Trust Board requested the New Mexico Taxation and Revenue Department to rule on the New Mexico tax consequences pertaining to transfers from New Mexico 529 accounts to ABLE accounts and distributions from such 529 accounts to pay tuition expenses for K-12 Schools. The Board recently received an advisory letter in response to its request.

According to the advisory letter, despite the new federal tax law changes for tuition expenses for K-12 Schools, such K-12 tuition expenses will not constitute qualified higher education expenses under the New Mexico tax code, thereby resulting in a recapture of any deduction related to amounts distributed for such K-12 tuition expenses.

In addition, the advisory letter clarifies that amounts distributed from a New Mexico 529 plan account to a Qualified ABLE program, including the ABLE program offered in the State of New Mexico (notwithstanding that such a transfer is a Qualified Withdrawal for federal tax purposes), will be subject to New Mexico income tax on earnings and distributed amounts previously deducted for New Mexico income tax purposes must be recaptured.

Account Owners who are New Mexico taxpayers should consult their own tax advisors before making withdrawals from a New Mexico 529 plan for K-12 tuition expenses or transferring funds from a New Mexico 529 Plan to a Qualified ABLE Program.

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As the result of a reorganization on May 24, 2019, the underlying Oppenheimer Funds' names have changed. Please see the underlying Funds current prospectus at for further information. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.

This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice, or for use to avoid penalties that may be imposed under U.S. federal tax laws. Contact your attorney or other advisor regarding your specific legal, investment or tax situation.

Scholar's Edge® is operated as a qualified tuition program offered by The Education Trust Board of New Mexico and is available to all U.S. residents. OFI Private Investments Inc. is the program manager for Scholar's Edge and OppenheimerFunds Distributor, Inc. is the distributor of Scholar's Edge. Some states offer favorable tax treatment to their residents only if they invest in the state's own plan. Investors should consider before investing whether their or their designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program, such as financial aid, scholarship funds, and protection from creditors, and should consult their tax advisor. These securities are neither FDIC insured nor guaranteed and may lose value.

Before investing in the Plan, investors should carefully consider the investment objectives, risks, charges and expenses associated with municipal fund securities. The Plan Description contain this and other information about the Plan, and may be obtained by asking your financial advisor, by visiting or calling 1.866.529.SAVE (1.866.529.7283). Investors should read these documents carefully before investing.

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