A 529 plan is a tax-advantaged savings account designed to help pay for education expenses. Maine allows certain tax benefits for 529 plan contributions and may require an addition to income if funds were withdrawn for non-qualified purposes.
What Is a 529 Plan?
A 529 plan helps families save for future education costs, including college, vocational school, and certain K-12 tuition expenses.
Qualified education expenses generally include:
- Tuition and fees
- Books and supplies
- Room and board (if the student attends at least half-time)
- Required equipment and materials
- Up to $10,000 per year for K-12 public, private, or religious school tuition for the same beneficiary
What Are the Contribution Requirements?
For Maine's NextGen 529 Plan:
- The minimum contribution to open an account is generally $25.
- If you fund the account through automatic bank withdrawals or payroll deductions, an initial contribution may not be required.
- Automatic contributions can be as little as $25 per month.
Can I Deduct My 529 Contributions on My Maine Return?
Yes. Beginning with tax year 2023, Maine reinstated the income subtraction modification for 529 plan contributions.
For tax year 2026, you may deduct up to $1,000 per beneficiary for contributions made to a Maine or non-Maine qualified tuition program, provided your federal adjusted gross income (AGI) does not exceed:
- $100,000 if filing Single or Married Filing Separately
- $200,000 if filing Married Filing Jointly, Head of Household, or Qualifying Surviving Spouse
The subtraction is reported on Maine Schedule 1S, Line 8.
What If I Withdraw Money From My 529 Plan?
If your withdrawal was used for qualified education expenses, it is generally not taxable.
If you take a non-qualified withdrawal, the earnings portion of the withdrawal may be subject to:
- Federal income tax
- An additional 10% federal tax penalty
You may also be required to add certain amounts back to Maine income, depending on your circumstances.
Can 529 Funds Be Rolled Over?
Yes. A rollover from a 529 plan to a qualified ABLE account for the same beneficiary, or an eligible family member of that beneficiary, may be completed federal income tax-free, subject to applicable ABLE contribution limits.
Where Do I Enter My Maine 529 Contribution Deduction in TaxSlayer?
To report your 529 plan contribution subtraction:
- Go to State Section
- Select Edit Maine Return
- Choose Subtractions From Income
- Find Contributions to Qualified Tuition Programs - 529 Plans
Enter your eligible contribution amount, up to the allowable limit.
What About 529 Plan Earnings?
Where do I enter my 529 plan earnings subtraction?
- Go to the State Section
- Edit Maine Return
- Choose Subtractions From Income
- Find Earnings on funds held in an ABLE savings account
Additional Information
For information about Maine's 529 program, visit NextGen 529.