Maryland 529 Plan Deduction: Save Up to $2,500 Annually

What is a Maryland 529 Plan?

A Maryland 529 Plan is a tax-advantaged savings plan designed to help families save for future college expenses. Contributions to a Maryland 529 Plan are made after taxes, but earnings grow tax-free and withdrawals are tax-free when used for qualified education expenses, such as tuition, fees, books, and room and board.

Maryland 529 Plan Deduction

Maryland residents who contribute to a Maryland 529 Plan can deduct up to $2,500 per year ($5,000 for married couples filing jointly) from their state income taxes. The deduction is available for both the account owner and the beneficiary, meaning that a family can save up to $5,000 per year on state taxes.

Benefits of the Maryland 529 Plan Deduction

• Reduce your state income taxes: The deduction can significantly reduce your Maryland state income taxes.
• Encourage saving for college: The deduction provides an incentive to save for your child's college education.
• Tax-free earnings: Earnings on your Maryland 529 Plan grow tax-free, helping your savings grow faster.
• Tax-free withdrawals: Withdrawals from a Maryland 529 Plan are tax-free when used for qualified education expenses.

How to Qualify for the Maryland 529 Plan Deduction

To qualify for the Maryland 529 Plan deduction, you must:

• Be a Maryland resident
• Contribute to a Maryland 529 Plan
• Deduct the contribution on your Maryland state income tax return

Table 1: Maryland 529 Plan Contribution Limits

Table 2: Maryland 529 Plan Deduction Limits

Table 3: Maryland 529 Plan Investment Options

The Maryland 529 Plan offers a variety of investment options, including:

• Age-Based Portfolios: These portfolios automatically adjust to become more conservative as the beneficiary approaches college age.
• Target-Date Portfolios: These portfolios invest in a mix of stocks and bonds, with the allocation becoming more conservative as the target date approaches.
• Index Funds: These funds track a specific market index, such as the S&P 500.
• Individual Stocks and Bonds: You can also invest in individual stocks and bonds through a Maryland 529 Plan.

Table 4: Maryland 529 Plan Fees

The Maryland 529 Plan charges the following fees:

• Account Maintenance Fee: $25 per year
• Investment Management Fee: 0.25% of assets under management, per year
• Withdrawal Fee: $25 per withdrawal

Is a Maryland 529 Plan Right for You?

A Maryland 529 Plan can be a valuable tool for saving for college. If you are a Maryland resident and plan on saving for your child's college education, you should consider opening a Maryland 529 Plan.

Here are some additional factors to consider when deciding if a Maryland 529 Plan is right for you:

• Your income: The Maryland 529 Plan deduction is available to all Maryland residents, regardless of income. However, the deduction is more valuable to higher-income taxpayers.
• Your child's age: The earlier you start saving for college, the more time your money has to grow tax-free.
• Your investment goals: The Maryland 529 Plan offers a variety of investment options to meet your individual needs.
• Your other savings options: You should consider all of your savings options before deciding whether to open a Maryland 529 Plan.

Conclusion

The Maryland 529 Plan is a great way to save for college and reduce your state income taxes. If you are a Maryland resident, you should consider opening a Maryland 529 Plan today.