Massachusetts 529 Deduction: A Comprehensive Guide to Saving for College

Massachusetts offers a generous tax deduction for contributions to 529 college savings plans, making it one of the most attractive states for families looking to save for higher education. This guide will provide a detailed overview of the Massachusetts 529 deduction, including eligibility requirements, contribution limits, and how to claim the deduction.

What is a 529 College Savings Plan?

A 529 plan is a tax-advantaged savings account designed specifically for higher education expenses. Contributions to a 529 plan grow tax-free, and withdrawals for qualified education expenses are also tax-free.

Massachusetts 529 Deduction

The Massachusetts 529 deduction allows taxpayers to deduct up to $5,000 per beneficiary per year from their state income taxes for contributions to a Massachusetts 529 plan. The deduction is available to both the account owner and the beneficiary, meaning that a family with multiple children could potentially deduct up to $10,000 per year.

Eligibility Requirements

To be eligible for the Massachusetts 529 deduction, taxpayers must:

• Be a Massachusetts resident
• File a Massachusetts income tax return
• Contribute to a Massachusetts 529 plan
• Designate a beneficiary who is a Massachusetts resident

Contribution Limits

The maximum contribution limit for a Massachusetts 529 plan is $5,000 per beneficiary per year. However, taxpayers who are making catch-up contributions for prior years may be able to contribute more.

How to Claim the Deduction

To claim the Massachusetts 529 deduction, taxpayers must:

• File a Massachusetts income tax return (Form 1)
• Complete Schedule C (Form 1-C), Massachusetts Income Statement with Supporting Schedules
• Line 11 of Schedule C is for the deduction of contributions to a qualified 529 plan. The form provides space to enter the name of the beneficiary, the name of the plan, and the amount of the contribution.

Benefits of the Massachusetts 529 Deduction

The Massachusetts 529 deduction provides several benefits to families saving for college:

• Reduces state income taxes: The deduction can significantly reduce the amount of state income taxes owed, freeing up more money for college savings.
• Encourages early saving: The deduction provides an incentive for families to start saving for college early, when the money has more time to grow.
• Makes college more affordable: The tax-free growth and withdrawals from a 529 plan can help make college more affordable for families.

Table 1: Massachusetts 529 Contribution Limits

Table 2: Massachusetts 529 Deduction by Filing Status

Table 3: Qualified Education Expenses

Table 4: Non-Qualified Education Expenses

Conclusion

The Massachusetts 529 deduction is a valuable tax incentive that can help families save for college. By taking advantage of this deduction, families can reduce their state income taxes, encourage early saving, and make college more affordable.