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Save on taxes while saving for college: NYS Tax Department highlights benefits of New York's 529 College Savings Program

Submitted Editorial

Mon, Dec 28th 2015 10:45 am

Only one week left; Make a contribution to a 529 account before Jan. 1 to take advantage of a valuable New York State tax deduction of up to $10,000 on your 2015 tax return

Editorial by New York State Tax Department

New York State Commissioner of Taxation and Finance Jerry Boone recently encouraged New Yorkers to open a New York State 529 College Savings Plan. The program enables taxpayers to save for the costs of college education for themselves, a child, grandchild, family member or friend and, potentially, enjoy some tax savings. To take advantage of the deduction on their 2015 tax returns, New Yorkers must enroll in the 529 Plan and make a contribution to their 529 accounts by Dec. 31.

"Education is always a sound investment," Boone said. "With the rising cost of tuition and textbooks, the 529 College Savings Program helps make higher education more affordable for college students while offering valuable tax benefits to the 529 account owners who provide additional financial support."

"Studies have suggested that having even a small amount of savings designated for college positively impacts college enrollment and graduation, particularly among children from low- and moderate-income families," Higher Education Services Corp. Acting President Elsa Magee said. "HESC joins Commissioner Boone and the New York State Department of Taxation and Finance in encouraging New Yorkers to invest in the educational future of a young person in your life this year by opening or contributing to a 529 account."

Last year, New Yorkers deducted more than $1.5 billion in 529 College Savings Plan contributions on their personal income tax returns. That accounted for a direct savings of $70 million to taxpayers.

New York taxpayers who own 529 accounts can deduct up to $5,000 of contributions to those accounts on their state income tax returns each year. A married couple filing jointly can deduct up to $5,000 each for a total of $10,000. It's important to note that the amount deducted may be subject to recapture in certain circumstances such as rollovers to another state's plan or nonqualified withdrawals.

Although contributions are not deductible for federal income tax purposes, all earnings on contributions in the account grow tax-free. Withdrawals aren't taxed either, as long as the money is used to pay for qualifying college-related expenses such as tuition, textbooks and room and board.

An account can be opened for as little as $25, and there's no monthly or yearly minimum. Setting up automatic payroll deduction makes it even easier to contribute to the College Savings Plan account.

Anyone can create an account - parents, grandparents, family or friends. The plan offers a variety of investment choices as well.

For more information, visit:

Visit our website, www.tax.ny.gov and follow the Tax Department on Facebook, Twitter and YouTube.

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