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529 plan state income tax benefits

Over 30 states, including the District of Columbia, currently offer a state income tax credit or deduction up to a certain amount. For example, contributions to a New York 529 plan of up to $5,000 per year by an individual or $10,000 per year by a married couple filing jointly are deductible in computing state income tax. But that doesn’t mean New York parents are limited to contributing $10,000 to their 529 plan. If the couple chooses to take advantage of the annual gift tax exclusion and deposits $15,000 this year, the entire amount will grow federal tax-free, but only the first $10,000 may be deducted from their state taxable income.

Next Steps

Upromise is a program that allows you to earn cash back to your 529 plan by simply shopping through their online portal, dining out, or signing up for their cash back credit card. CollegeBacker also has a cash back shopping portal, as well as an easy to use gifting page for family and friends to make a contribution to your child’s college fund. 

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Saving For College is an unbiased, independent resource for parents and financial professionals, providing them with information and tools to understand the benefits of 529 college savings plans and how to meet the challenge of increasing college costs.