Tuesday, November 7, 2017

New for Massachusetts 2017 Tax Returns - 529 Plan Contribution Deduction

As reported earlier in the year, Chapter 62, Section 3A(a)(19) of the MA tax statute was amended to allow a deduction from MA Part A income for…

“…the purchase of an interest in, or the amount contributed in the taxable year to an account in, a prepaid tuition program or college savings program established by the commonwealtjh or an instrumentality or authority of the commonwealth…” (emphasis added).  According to the web site www.savingsfor college, the eligible funds are U Fund College Investment Plan and U Plan, both managed by Fidelity.

There is a deduction recapture provision if a distribution is NOT used to pay qualified higher education expenses (as defined in the federal Code), or for a reason other than the beneficiaries death, disability or receipt of a scholarship.

The deduction per year shall not exceed $1,000 for a single person or a married person filing separately, or $2,000 for married filing jointly.  Furthermore, the deduction is limited to taxable years beginning on or after January 1, 2017 through the tax year beginning on January 1, 2021.

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