![]() Regardless of whether the incentive applies to the in- or out-of-state plan, having college-educated residents is a win-win for both the states and 529 plan account owners. Top 5 benefits to states offering a 529 state tax benefitĭespite these challenges, for the state the benefits of offering a 529 tax deduction or credit outweigh the short-term revenue loss. Governor Mark Dayton vetoed the bill at the last minute for reasons unrelated to the 529 provision. It would have also offered a $500 tax credit option for those in the lowest income brackets to encourage saving. In June 2016, Minnesota lawmakers approved a bill that included a provision allowing residents a state tax deduction of up to $1,500 a year ($3,000 for couples filing jointly) for 529 plan contributions.Maine residents still have the Maine Matching Grant Program, however. At the end of 2015, the tax deduction for Maine residents expired.The state tax deduction available to North Carolina taxpayers for contributions to the National College Savings Program was eliminated in 2014.We’ve seen numerous examples of these types of challenges in recent years, including: Even when a proposed deduction makes it into a bill there is no guarantee it will be enacted, since it’s usually packaged alongside various unrelated legislation. Common roadblocks to state tax incentivesĪlmost every state struggles to balance their budget each year, and tax deductions both lower revenue and make it less predictable. Ideally, we would like to see other states follow in Massachusetts’s footsteps, but historically this hasn’t been the case. This announcement comes as a welcome surprise to families, as other states have found it challenging to sustain or initialize a 529 tax benefit. Residents will be able to deduct up to $1,000 in contributions to a Massachusetts Educational Financing Authority (MEFA) U.Fund from their state income tax (up to $2,000 for married couples filing jointly) beginning Januthrough the 2021 tax year, when the deduction is scheduled to expire. However, it also included a new tax benefit for families saving for college. The primary role of the bill was to promote economic development for the state. Massachusetts Governor Charlie Baker recently signed House Bill 4569, ‘An Act relative to job creation and workforce development’ into law on August 10, 2016.
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