A unique Maryland State income subtraction for Maryland taxpayers
Maryland 529 plans are the only plans to offer Maryland taxpayers an annual Maryland State income subtraction on contributions of up to $2,500 per Prepaid College Trust account or per College Investment Plan beneficiary.
DID YOU KNOW...
Any Maryland taxpayer who opens an account for your child or contributes to an existing account is eligible for the Maryland state income subtraction. It's a great way for friends and family to give the gift of education.
How it works
Maryland College Investment Plan
If you are the account owner or a contributor, you can subtract up to $2,500 per beneficiary from your Maryland state income for contributions in that calendar year. Contributions in excess of $2,500 per beneficiary can be subtracted for up to the next 10 years.
For Example: If you contribute $27,500 in Year 1 to the College Investment Plan for your child, you may subtract $2,500 per tax year for each of Years 1 through 11 (11 x $2,500 = $27,500). If you also contribute $27,500 in Year 1 to one or more Investment Portfolios for another child, you may subtract an additional $2,500 per tax year for each of Years 1 through 11, for a total subtraction of $5,000 per tax year from Maryland adjusted gross income.
Maximize State Income Tax Subtraction
Taking Your Subtraction
Some important things to remember:
- Residency matters. If you no longer pay Maryland income tax, you will no longer receive the Maryland income subtraction. Check with your new state of residence about its state tax benefits, available for your 529 plan investment.
- You are responsible for retaining documentation of the timing of your contributions for your tax records.
- If you receive a State contribution for any Investment Plan account in a given year, you are not eligible in that year for the income subtraction on your State taxes for contributions that you made to that or any other Investment Plan account. You should check with your tax professional regarding your specific situation.
Tax incentives
Opportunity for State and Federal Tax Incentives
- Any investment growth is tax-deferred at the Maryland State and federal level
- Any earnings are Maryland and federally tax-free* when funds are distributed for eligible qualified education expenses.
*There may be tax implications for Maryland taxpayers that take a distribution for the education loan of a sibling of the beneficiary. Maryland 529 cannot and does not provide tax advice. Your tax consequences depend on your individual circumstances. If you withdraw funds that are not used for qualified education expenses, any earnings on that distribution may be subject to income taxes and a 10% federal penalty. In addition, there may be Maryland tax consequences for your contributions. State tax laws and treatment may vary. So, check with a tax professional regarding your specific situation.
Learn more about tax advantages
Additional Resources
Learn more about the federal and Maryland tax benefits of Maryland 529
Plan Disclosures
Review the Certain Federal Tax Considerations and Certain State Tax Considerations sections
Go to Plan Disclosures
The availability of tax benefits may be conditioned on meeting certain requirements, such as residency, purpose for or timing of distributions, or other factors as applicable. Please consult with a tax professional regarding your specific situation.
