How to Maximize Your 529 Deduction in Massachusetts

Massachusetts offers a generous state income tax deduction for contributions to a 529 plan. This deduction can save you hundreds of dollars on your taxes each year, and it can help you grow your child's college savings faster.

How Much Can You Deduct?

The Massachusetts 529 deduction is one of the most generous in the country. For the 2023 tax year, you can deduct up to $1,000 per year for each beneficiary. This means that if you have two children, you can deduct up to $2,000 per year.

The deduction is available to all Massachusetts residents, regardless of their income. However, the deduction is phased out for high-income taxpayers. The phase-out begins at $65,000 for single filers and $130,000 for married couples filing jointly.

How to Claim the Deduction

To claim the 529 deduction, you must file a Massachusetts state income tax return (Form 1). The deduction is claimed on line 22 of the return.

You must provide the following information on your tax return:

• The name of the beneficiary
• The beneficiary's Social Security number
• The amount of your contribution

Benefits of the 529 Deduction

The 529 deduction can provide several benefits, including:

• Tax savings: The deduction can save you hundreds of dollars on your taxes each year.
• Increased college savings: The deduction can help you grow your child's college savings faster.
• Peace of mind: Knowing that you are saving for your child's college education can give you peace of mind.

Tips for Maximizing Your 529 Deduction

Here are a few tips for maximizing your 529 deduction:

• Contribute early and often: The sooner you start contributing to a 529 plan, the more time your money will have to grow.
• Contribute the maximum amount: Contribute the maximum amount you can afford each year.
• Consider a lump-sum contribution: If you have the money available, consider making a lump-sum contribution to your 529 plan. This can help you take advantage of the tax savings sooner.
• Use a 529 plan from a different state: Massachusetts residents can contribute to a 529 plan from any state. However, some states offer more generous deductions than others.

529 Plans in Massachusetts

There are two 529 plans offered in Massachusetts:

• The UMass 529 Plan: This plan is offered by the University of Massachusetts.
• The Fidelity 529 Plan: This plan is offered by Fidelity Investments.

Both plans offer a variety of investment options, including age-based portfolios and target-date funds.

Which 529 Plan Is Right for You?

The best 529 plan for you will depend on your individual circumstances. Consider the following factors when choosing a plan:

• Investment options: The plan should offer a variety of investment options that meet your needs.
• Fees: The plan should have low fees that will not eat into your savings.
• Customer service: The plan should provide excellent customer service.

Frequently Asked Questions

Q: What is the maximum 529 deduction in Massachusetts?

A: The maximum 529 deduction in Massachusetts is $1,000 per beneficiary per year.

Q: How do I claim the 529 deduction?

A: You can claim the 529 deduction on line 22 of the Massachusetts state income tax return (Form 1).

Q: Which 529 plan is the best?

A: The best 529 plan for you will depend on your individual circumstances. Consider the investment options, fees, and customer service when choosing a plan.

Conclusion

The Massachusetts 529 deduction is a valuable tax break that can help you save money on your taxes and grow your child's college savings faster. By following the tips in this article, you can maximize your 529 deduction and get the most out of this valuable savings tool.

Additional Resources

• Massachusetts Department of Revenue: 529 Plans
• UMass 529 Plan
• Fidelity 529 Plan