The new law allows withdrawals for qualified college expenses, to be made free of federal income taxes from the beginning of next year, the state treasurer writes in a press release.
In addition, the legislation raises the amount of college living expenses that can fall under the plan. It also now allows rollovers and beneficiary changes to include first cousins, where previously eligibility was limited to immediate family members.
The MACS program allows families to open an account with a minimum investment of $25, or $15 through an automatic payroll deduction. The maximum account balance limit is $235,000.
The money can be used for future costs, including tuition, fees, supplies books, and certain living expenses, at US colleges and certain foreign schools.
Other tax advantages of the MACS program include:
- a state income tax deduction for contributions up to $10,000 per individual, or $20,000 for joint filers, each year
- exemption from state taxes
- account holders may gift up to $50,000 in a single year, or $100,000 for joint filers, per beneficiary without federal tax consequences by spreading the gift-tax exclusion over five years
- although the account owner controls the account, funds within are generally excluded for gross estate for federal estate tax purposes.