Maine Reintroduces Credit for 529 Education Plan Contributions
The State of Maine has reinstated (and increased) a deduction for the tax year 2023 for contributions to Qualified Tuition Programs, commonly known as “529 College Savings Plans.” Deductions of up to $1,000 per student are available for single or married filing separate taxpayers making up to $100,000 and for married filing joint or head of household taxpayers making up to $200,000. Taxpayers do not have to be the account owners to qualify for the deduction, nor does the beneficiary have to be a dependent.
529 accounts already provide families, regardless of income, an opportunity to invest in college without subjecting earnings to federal or state taxes as long as the funds are used for education expenses. This includes not only traditional higher education expenses such as tuition, room and board, and books, but also other items such as trade schools and vocational programs, special needs services, and computers and internet access.
There are no annual limits to contributions to 529 plans, although each state establishes maximum lifetime contributions. There are, however, gift tax considerations related to 529 plan contributions. Annual gifting limits, based on the Gift Tax Annual Exclusion, rose to $17,000 in 2023 ($34,000 per married couple). Taxpayers can elect to make “lump sum contributions” to 529 plans of up to five times the annual exclusion ($85,000 in 2023) if the contribution is treated as if it is spread out over the subsequent years.
If you think you may qualify for this deduction or other education tax benefits such as the Maine Student Loan Repayment Credit, the Student Loan Interest Deduction, or the Tuition and Fees Deductions, contact your Marcum tax professional about how to best utilize these opportunities.
