MNLEG: 529 credit in the tax bill

College is expensive, I dread the expense for the kids but I am making a game effort in the preceding years here.  Been tuning up the kid’s 529Ks, so I was curious to see there is a 529 credit in the tax bill.

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Max of $500 credited against, I guess, your personal income balance owed, tabulated by calculating 529 contributions against somewhat arbitrary fractional multi-pliers that are stair stepped amongst some income boundaries.

The most generous multiplier there is .50 on the dollar (max of $500) available to those with an AGI of less than $80k.

Important question:  Do I get this?

Answer: maybe, I’m not sure I’ve had an AGI over $80 given standard deduction, med insurance premiums, 401k, etc., but it’s been close.

Anyway, I contribute $2500 a year into the kids 529’s.  .5 of $2500, is way over that $500, I’d max out there.  If I go into the next AGI bracket, $80k – $100k, the multiplier is .25.  I’m going to max out there too, it’s over $500.  So good, I get the credit.

Is it meaningful?  Yeah, kinda.  I got to think $500 is more than 10% of my typical state tax obligation.  Pretty generous there, to the point that I imagine this goes away if the state runs a deficit in the next couple years.

2 thoughts on “MNLEG: 529 credit in the tax bill

  1. pm1956

    The policy question, however, is if this credit will lead more people to use 529 plans, rather than just rewarding people like you (and me) who are already doing so.

    1. W.E. Peterson Post author

      I agree, I understand….

      Has some appearance of being a carveout for the affluent middle class… and thus I’m surprised it’s there, surprised it passed! Though I suppose one shouldn’t be surprised, the mildly affluent middle class has a lot of electoral power.

      And though the affluent middle class needs it less, it isn’t without merit. College is expensive, there’s need to create some frameworks outside of student loans and financing…


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