In most states, December 31 is an important deadline for parents and grandparents contributing to 529 plans. To qualify for a state tax credit or deduction this year related to your contribution, you may have to meet that year-end deadline.
However, this letter is for informational purposes only and is not a replacement for real-life advice. Make certain to conduct a tax or legal professional before modifying your college-funding strategy.
More than 30 states offer potential tax benefits. Usually, you only qualify for them by contributing to the 529 plan in your home state. If you live in Arizona, Arkansas, Kansas, Minnesota, Missouri, Montana, or Pennsylvania, however, you may claim a deduction for a contribution to any state’s 529 plan.1
A 529 plan is a college savings plan that allows individuals to save for college on a tax-advantaged basis. State tax treatment of 529 plans is only one factor to consider prior to committing to a savings plan. Also, consider the fees and expenses associated with the particular plan. Whether a state tax deduction is available will depend on your state of residence. State tax laws and treatment may vary. State tax laws may be different than federal tax laws. Earnings on non-qualified distributions will be subject to income tax and a 10% federal penalty tax.
If you miss the December 31 deadline, your contribution will not allow you to qualify for a state tax break this year unless you are contributing to a 529 plan in one of the following states: Georgia, Iowa, Mississippi, Oklahoma, South Carolina, and Wisconsin.2
Georgia, Mississippi, Oklahoma, South Carolina, and Wisconsin will give you until April 15, 2021 to make a 529 plan contribution for 2020 while still letting you qualify for a 2020 state tax benefit. Iowa’s annual deadline is April 30.2
Please touch base with me – I will be happy to provide some additional guidance.
1. The Street, April 22, 2020
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
529 Plan Contributions
April 28, 2021