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Compliance July 7, 2006
PA Institutes 529 Plan Tax Breaks
July 7, 2006 (PLANSPONSOR.com) - College Savings
Foundation, the Washington, DC-based lobbying group for 529
educational savings plans, publicly applauded the State of
Pennsylvania on Friday for enacting a new state tax deduction
on 529 plan contributions.
Reported by Fred Schneyer
A news release said that the tax deduction, contained in a bill signed by Governor Edward Rendell, benefits Pennsylvania families who are saving for a future education. The tax treatment was effective on Thursday.
By investing in qualified tuition account programs, Pennsylvania families are eligible for as much as $12,000 per beneficiary in state tax deductions, in addition to the federal tax benefits, for contributions made to any qualified 529 plans. The bill also eliminates the so-called “back-end” disparity that previously did not allow state tax exemptions for distributions on out-of-state plans.
“With the new qualified tuition account program tax
breaks, it immediately becomes easier for families to save
today for tomorrow’s education by allowing their
investment to stretch,” Rendell said in a statement
quoted in the news relase. “Qualified tuition account
programs have always been a good deal for parents and
others who are saving for higher education. The tax
deduction contained in this year’s budget will make the
plans even more attractive because parents will not have to
pay tax on the money they set aside for higher
learning.”
The new law also provides a state tax exemption for
distributions from qualified tuition savings plans.
The law allows people to take a state tax deduction
for their contributions to health savings accounts, and
employer contributions won’t need to be reported as
income.
Text of Pennsylvania S.B. 300 is available
here
.