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New MN Tax Break for 529 Plans
[/fusion_text][fusion_text]Saving for college just got a little less expensive in Minnesota. Why haven’t you heard much about this? It is part of a bill that Governor Mark Dayton and the legislature took to the MN Supreme Court in a dispute about other tax cuts and funding of the legislature. Now they are in mediation to work it out. It is important to note that the bill was signed into law and the two sides are not arguing over the tax credit or tax deduction for 529 plan contributions.
So while we cannot be 100% sure that the law won’t be renegotiated, I’m confident that both sides want to keep an incentive in place to help you save for college. Here is what you need to know about the law as it is passed today. There is a tax credit for couples who earn less than $75,000. Tax credits are better than deductions because they get subtracted off of the taxes you owe (not the income you’re taxed on). The tax credit is for 50% of your contribution up to a maximum credit of $500.
If you make more than $75k, the tax credit gets phased out. However there is a tax deduction that you can take instead (you can’t take both). The tax deduction has no income limits. It lets you exclude dollar for dollar up to $3k of taxable income from MN income taxes for your 529 plan contributions. At the max tax bracket, that’s a little less than $300 in savings.
The best part about these new tax breaks is that you do not need to make the contributions to the state of MN 529 plan for it to count. You can choose any state you like. We prefer low cost leaders like Utah and Nevada 529 plans.
Of course, I’m not a CPA and do not give tax advice. Like anything else in our complicated tax system, you’re best off consulting with an accountant for the full details.[/fusion_text][separator style_type=”single” top_margin=”” bottom_margin=”” sep_color=”” icon=”” width=”” class=”” id=””][fusion_text]
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