If you contributed to a Vermont 529 plan (VT529), you may be able to claim a nonrefundable credit. If you withdrew money from your 529 plan, you may have to add the withdrawal back to your income if it was not used for educational purposes.
What is the 529 plan?
Its main purpose is to help families contend with the future high costs of their children’s or grandchildren’s college or vocational education.
What are the qualifications?
Assets from 529 plans may be used at any eligible school, including two- and four-year colleges, graduate schools and vocational and technical schools. Funds may be used for tuition, fees, certain room and board costs, and required computers and course-related software.
What are the limits?
The 2025 contribution limit for a Vermont 529 plan is a lifetime maximum of $550,000 per beneficiary. There is no annual contribution limit. Vermont taxpayers can receive a nonrefundable state income tax credit of up to 10% on contributions to the VT529 plan.
For individuals: Up to $250 per beneficiary (based on the first $2,500 contributed).
For married couples filing jointly: Up to $500 per beneficiary (based on the first $5,000 contributed).
Credit deadline: To claim the credit, contributions must be made by December 31st of the tax year.
What about carryovers?
Rollovers from another state’s 529 plan into VHEIP are also eligible for the tax credit on the contributions portion of the rollover (not on the earnings portion). The funds must remain in VHEIP for the remainder of the tax year in order to claim the tax credit.
What if I don’t use it for education expenses?
Earnings portion of the withdrawal, plus a 10% penalty, and you must repay any Vermont state tax credit that was given for the contributions portion of the non-qualified withdrawal.
Program Entry
- State Section
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- Credits
- VT IN-119 Tax Credits
- VT Higher Education Investment