If you made a contribution to the 529 plan, you will be able to claim a subtraction from income. 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 Maryland 529 plan?
A 529 plan is a tax-advantaged education savings plan designed to encourage families to save for future higher education expenses. The Maryland 529 college savings plans are the only 529 plans that offer a Maryland State income deduction each year for your payments or contributions to the plans.
There are two different types of Maryland 529 plans, they include an investment plan and a prepaid tuition plan.
What are the qualifications?
Qualified Higher Education Expenses are defined in the Internal Revenue Code. For a complete list view IRS Publication 970. The following Qualified Higher Education Expenses must be required for enrollment or attendance at an eligible postsecondary school (college, university, or technical school):
- Mandatory fees and the cost of textbooks
- Supplies, including computer equipment
- Room and board
- Higher education-related expenses for special needs Beneficiaries
Qualified Higher Education Expenses now include up to $10,000 of tuition per beneficiary, per year for attendance at an elementary or secondary public, private, or parochial school.
What are the limits?
For single or MFJ filers: $2,500 per year for each 529 plan.
What about rollovers from other similar state plans?
Maryland will accept rollovers from any other fund that meets the IRS definition of a Qualified Tuition Program. However, before you initiate the rollover process, we recommend contacting your current 529 provider/manager to verify the funds are eligible for a rollover to a Maryland 529 plan and what their requirements for processing a rollover are. Federal law limits rollovers between Qualified Tuition Program to once every 12-month period to one per Beneficiary.
What if I don’t use it for education expenses?
You may request a distribution or refund at any time, but you will generally have to pay state and federal taxes in addition to a 10% federal penalty on any earnings. For all the details on what is considered an eligible expense, check out IRS Publication 970.
Where do I report it?
- Select State from the navigation bar
- Edit Maryland return
- Select Subtractions from Income
- Select Other Subtractions from Income
- Select subtraction XA/XB from the list
For more information regarding Maryland's 529 plans, please visit their FAQs.