529 Tax Benefits Maryland

Maryland offers generous tax benefits for 529 plans, making it an attractive option for families saving for college. Here's an overview of how you can take advantage of these benefits:

State Income Tax Deduction

Maryland residents can deduct up to $2,500 per beneficiary from their state income taxes for contributions made to a Maryland 529 plan. This deduction is available for both traditional 529 plans and the newer Maryland College Investment Plan (MCIP).

Earnings are Tax-Free

Earnings on 529 plans grow tax-free federally and in Maryland. This means that the money you save in a 529 plan will continue to grow without being taxed, making it a more effective way to save for college than a regular savings account.

Withdrawals are Tax-Free

Withdrawals from 529 plans are tax-free federally and in Maryland if used to pay for qualified education expenses. This includes tuition, fees, books, supplies, and room and board.

Other Tax Benefits

In addition to the state income tax deduction and tax-free earnings and withdrawals, Maryland 529 plans also offer the following benefits:

• No age limit: You can contribute to a 529 plan for your child at any age, even if they haven't started college yet.
• Rollover option: You can roll over funds from a 529 plan in another state to a Maryland 529 plan without incurring any penalties or taxes.
• Gift tax exclusion: Gifts to a 529 plan are eligible for the annual gift tax exclusion, which is $16,000 per donor in 2023.

How to Take Advantage of 529 Tax Benefits

To take advantage of the 529 tax benefits Maryland offers, you need to open a 529 plan with a qualified provider. There are a number of different providers to choose from, so it's important to compare your options and choose the plan that best meets your needs.

Once you have opened a 529 plan, you can start contributing money. The maximum contribution limit for Maryland 529 plans is $350,000 per beneficiary.

Conclusion

Maryland's 529 tax benefits offer a great way to save for college. By taking advantage of these benefits, you can reduce the cost of college and make it more affordable for your child.

Additional Resources

• Maryland 529 Plans
• Maryland College Investment Plan (MCIP)
• 529 Plan Comparison Tool

FAQs

1. What are the eligibility requirements for the Maryland 529 tax deduction?

To be eligible for the Maryland 529 tax deduction, you must be a Maryland resident and the beneficiary of the 529 plan must be a Maryland resident or attending a Maryland college or university.

2. What is the maximum amount I can contribute to a Maryland 529 plan?

The maximum contribution limit for Maryland 529 plans is $350,000 per beneficiary.

3. Can I use funds from a 529 plan to pay for K-12 expenses?

No, funds from a 529 plan can only be used to pay for qualified education expenses at the college level.

4. What happens if I withdraw funds from a 529 plan for non-qualified expenses?

If you withdraw funds from a 529 plan for non-qualified expenses, you will be subject to income tax on the earnings and a 10% penalty.

5. Can I change the beneficiary of a 529 plan?

Yes, you can change the beneficiary of a 529 plan at any time. However, you may be subject to income tax and a 10% penalty if you change the beneficiary to a non-family member.

6. What is the difference between a traditional 529 plan and a Maryland College Investment Plan (MCIP)?