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 Account, or per Beneficiary, depending on what plan you choose.

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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.

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Here’s How It Works:

Maryland College Investment Plan

If you are the Account Holder 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.

Maryland Prepaid College Trust*

If you are the Account Holder or a contributor, you can subtract up to $2,500 per Account from your Maryland State income for payments in that calendar year. Payments in excess of $2,500 per Account can be subtracted in future years until the full amount of payments has been subtracted.

For example: If you purchase a 2-year University Plan for your child for a lump sum of $21,000, you can subtract $2,500 per tax year for each of Years 1 through 8. Over time, that adds up to a total of $20,000. You can then subtract the remaining $1,000 of your payment in Year 9.

*

As of June 1, 2023, the Maryland Prepaid College Trust is no longer accepting new enrollments. Existing Account Holders may continue to make contributions to their Account and are still eligible to take the income subtraction, if they are a Maryland taxpayer.

Maximizing your State income tax subtraction

Taking Your Subtraction

To take advantage of your State income subtraction for a particular year, simply log in to your Account or contribute by mailing in a check. Be sure to allow enough time for the contribution or payment to be processed through your bank by December 31.

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.

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.

Additional Resources

Check out the resources below to learn more about the federal and Maryland tax benefits of Maryland 529:

Review the Certain Federal Tax Considerations and Certain State Tax Considerations sections of each of our Plan Disclosure Statements.

For Maryland tax information, visit www.marylandtaxes.gov or call 1-800-MD-TAXES.

For federal tax information, visit IRS.gov and review IRS Publication 970.

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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.