Tax Experts
No Federal Deductions for 529 Contributions
Only states allow tax write-offs for funding a college-savings plan.
By Kevin McCormally, Editorial Director, Kiplinger.com
April 4, 2007
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If I put money into a Michigan 529 college-savings plan for our granddaughter, is that a tax write-off? If you gift money to your children, is that also a tax deduction?
Kevin responds:
There is no federal tax deduction for contributions to 529 college savings plans (Uncle Sam's contribution is that earnings can be withdrawn tax free when used for qualifying college expenses). But the state of Michigan does allow state residents to deduct on state returns up to $5,000 ($10,000 on joint returns) of contributions to the Michigan 529 plan.
Also, there's no deduction for making gifts to your children. Gifts are deductible only if you are making them to qualifying charitable organizations.
I opened a 529 account for my daughter in my home state, New York, in February 2007. Can I claim a deduction for tax year 2006?
To deduct contributions to New York's 529 plan on your New York return, the contribution had to be made by December 31, 2006. The state does not follow the IRA rule of allowing contributions up to the due date of the return to count for the previous year.
See the previous question and answer and our archive of questions and answers.