Pennsylvania is now the first state in the nation offering investors tax breaks on any 529 plan, Dow Jones reports. Although Maine and Kansas also plan to offer such breaks, they will not begin until next year and are far less generous than Pennsylvania's tax breaks.
Pennsylvania's new law allows taxpayers to deduct up to $12,000 in contributions to a 529 from their state income tax. Couples may deduct up to $24,000. In Maine, taxpayers will only be able to deduct $250 in 529 contributions, while Kansas is allowing deductions of $3,000 per individual and $6,000 per couple.
"I see it as consumer friendly because it pushes everyone onto the same level on the same playing field," said Joe Hurley, founder of savingforcollege.com. He said he expects more states will probably follow suit.
Pennsylvania's 529 still offers some features that other 529s do not, however. For one thing, even when a family opens a 529 with Pennsylvania, the savings will not affect a student's eligibility for student aid. The investments are also protected from creditors.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.