Happy 529 college savings plan day! Learn about Minnesota's new tax benefit!

Today is National 529 College Savings Day, a day to bring awareness to the options available to save for college expenses.

Do you have clients who contribute to a college savings plan? If so, they may qualify for a new Minnesota tax benefit: the Education Savings Account Contribution Credit or Subtraction.

Education Savings Account Contribution Credit

Beginning in tax year 2017, your clients may qualify for a nonrefundable credit if they:

• Are full-year or part-year Minnesota residents
• Contribute to a qualified section 529 college savings plan
• Meet the income guidelines in the table below

If your client’s filing status is	Then your client’s Adjusted Gross Income must be
Single, head of household, married filing separate, or qualifying widow(er)	$100,000 or less
Married filing jointly	$160,000 or less

How much is the credit?

The credit is 50 percent of your client’s net contributions (contributions minus distributions) made to a 529 plan during the year up to a maximum of $500. The amount phases out if their Adjusted Gross Income is over $75,000.

 

Education Savings Account Contribution Subtraction

If your clients contribute to a college savings plan but do not qualify for the credit, they may qualify for a subtraction. There are no income limits to qualify for the subtraction.

How much is the subtraction?

The subtraction is equal to your client’s contributions made to a 529 plan during the year minus any distributions. The amount your client may claim depends on their filing status.

If your client’s filing status is	Then your client may qualify for a subtraction up to
Single, head of household, married filing separate, or qualifying widow(er)	$1,500
Married filing jointly	$3,000

How do my clients claim the credit or subtraction?

Complete Schedule M1529, Education Savings Account Contribution Credit or Subtraction, when filing your clients’ Minnesota income tax returns. Your clients may claim either the credit or the subtraction, but not both.

For more information about the credit or subtraction, see our Education Savings Account webpage.