Smart Tip!Contribute to a 529 Plan
Planning for the future is always a smart financial decision and 529 plans are a great tool for you to save for your kids’ college education. 529 plans are investment accounts designed for education savings that also provide tax advantages. At Brannen CPA Services, we want our clients to rediscover the strength in their numbers and we know that it always feels good when you can save your money in smart ways. In this article we provide an overview of the benefits of contributing to a 529 plan.
Maine State Tax Deduction for 529 Plans
Maine has its own 529 plan called NextGen 529, administered by the Finance Authority of Maine (FAME). In 2023, a new Maine law went into effect, providing taxpayers up to a $1,000 tax deduction per student for contributions made to a 529 education savings plan. Who qualifies for this tax deduction?
All Maine state taxpayers who earn less than $100,000 if filing single or married filing separately, or less than $200,000 if filing as a head of household or married filing jointly.
You can also receive federal tax breaks for all earnings in your 529 plan accounts, provided the money is used for higher education expenses. This is true regardless of your income. Qualified expenses include:
Tuition
Room & Board
Computers
Books
Grants for Maine Residents
Maine has a matching program to encourage Mainers to save for their kids’ education.
$100 Matching Grant: If you open an education savings account of $25 or more within your child’s first year, you will receive a $100 grant.
30% NextStep Matching Grant: When you contribute to your child’s account each year, you’ll receive a 30% matching grant, up to $300.
Flexibility
Another benefit of 529 plans is their flexibility. Beyond using the savings to pay for a 4-year college, the money could also be used at qualifying apprenticeship programs and trade schools. Parents can also use leftover funds for continuing education costs or to help pay up to $10,000 in student loan debt.
There are investment options with 529 accounts, which you can manage yourself or with the help of a financial advisor. More information is available at Next Gen’s website:
Planning ahead makes a difference and contributing to a 529 plan is a smart way to save for your child’s education. The tax benefits are worth it! If you have questions about saving for your child’s education, please give us a call at 207.271.9600. We’re here to help you thrive!