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 .