(UNDATED) – Are you saving up for college or trade school for a child, relative, or yourself? If so, you should check out Indiana’s CollegeChoice 529 education savings plans which let you make contributions to an account used to pay qualified higher education expenses.
CollegeChoice 529 Savings Plans are administered by the Indiana Education Savings Authority (IESA), and help Hoosiers invest smartly and plan for the future.
These accounts can be used to pay for any college, university or vocational training program that’s eligible for federal financial aid, which includes a large amount of schools and programs. Qualified higher education expenses include:
- Required equipment
- Reasonable room and board expenses (if beneficiary is enrolled half-time or more)
- K-12 tuition for a public, private or religious school (added in 2018)
In addition to being able to save money for education, if you contribute to an Indiana CollegeChoice 529 Education Savings Plan, you’re also eligible for a 20 percent state income tax credit of up to $1,000 each year on your contributions. That applies to anyone who contributes even if you’re not the owner of the account. So, the whole family can benefit from giving to the savings plan.
There are two changes to the tax credit that you should keep in mind while filing your taxes this season.
- The 529 savings plan credit is now available to more Hoosiers filing this tax season. Before 2020, individuals who were “Married Filing Separately” couldn’t claim this credit. Starting this tax season, they can! Each spouse who is married filing separately can claim maximum credit up to $500 or 20% of their own contribution, whichever is less.
- Withdrawals for payment of student loans are no longer considered “qualified higher education expenses.” If you make a nonqualified withdrawal (such as for student loans) and claimed the tax credit, you need to repay the tax credit by reporting it on your annual income tax return—just include Schedule IN-CR with the return and list the repayment on Schedule 4 of Form IT-40 or Schedule E of Form IT-40PNR, whichever is appropriate.
If you want to know more about or establish a CollegeChoice 592 savings plan, visit the IESA.
For more information about savings plan tax credits, check out this Information Bulletin.