State Issues: 529 Tax Parity Legislation
Last Updated: June 9, 2008
Overview:
While the federal tax treatment of 529 plans, or qualified tuition plans, is standard throughout the 50 states, the state tax treatment of 529 plans differs from state to state. Many states provide tax deductions or benefits for taxpayers to invest in the state-sponsored 529 plan, while taxing out-of-state 529 plans.
Position:
SIFMA strongly supports legislation that extends equal tax treatment to all qualified 529 plans. SIFMA strongly encourages states that are considering creating a new 529 state tax deduction to apply that deduction to all qualified 529 plans. SIFMA also encourages those states that have an existing tax deduction, which favors the state sponsored plan, to extend the tax deduction across the board to all qualified 529 plans.
Status:
In Missouri, legislation is on the governor’s desk which will extend the state’s existing deduction of $8,000 per individual/$16,000 per married couple filing jointly to all qualified 529 plans. In Hawaii, the Senate passed legislation creating a deduction for contributions to all qualified 529 plans, but agreement could not be reached with the House before the end of the session. In Connecticut, legislation which would extend the state’s existing deduction to all qualified 529 plans was heard in committee, but general fiscal concerns kept most bills with a fiscal note from further consideration. SIFMA is also working to encourage Alabama to eliminate its preferential back-end treatment of 529 earnings accrued in the state-sponsored plan.
