Many families utilize college savings accounts established under Section 529 of Internal Revenue Code to save for the future costs of higher education. These so-called “529 Plans” are tax-advantaged savings plans designed to encourage individuals to save for future college expenses. Any earnings within a 529 Plan grow federal income tax deferred and may also be eligible for certain state deductions.
In August 2016, Governor Charlie Baker implemented a new bill that provides a new tax benefit to families utilizing 529 Plans to save for college. Beginning January 1, 2017, Massachusetts residents will be able to deduct up to $1,000 (or up to $2,000 for married couples filing jointly) in contributions made to 529 Plans on their state income tax return. The new deduction is scheduled to expire at the end of 2021.