529 Savings Deduction Going Away
Contributors to 529 college savings plans will no longer qualify for a state tax credit. The elimination of the deduction is part of a larger overhaul to the state’s tax code that goes into effect January 1st.
"The program itself is intended to encourage people to save. But when you lose a symbol that says we want to give you an extra incentive that cannot be a positive thing. I think it’s more symbolic than it is financially meaningful, but yea symbolically it’s unfortunate from my perspective," said Steven Brooks is the Executive Director with the State Education Assistance Authority.
Brooks says despite the symbolic blow, some major tax advantages of 529 continue to be present. One benefit is that the earnings accrue tax free. When the money is spent on qualified higher education expenses there is no tax either at the state or federal level.
Supporters say eliminating tax credits makes the system more fair and efficient. Opponents of eliminating the 529 deduction point to other tax credits that weren’t eliminated. One still on the books limits the sales tax on a yacht or jet to just $1,500.