NC 529 College Savings Deduction Repealed 2014

Financial Planning

The North Carolina state tax deduction for contributions made to 529 College Savings Plans will be repealed effective January 1, 2014. Before this date, taxpayers are able to deduct $2,500 contributions annually. ($5,000 for married taxpayers filing jointly.)

The repeal of this deduction is just one of the many changes affecting North Carolinians as a result of the 2013 NC Tax Reform. Taxpayers will no longer have the deduction available after the New Year. Parents, grandparents, and other individuals contributing to a child’s 529 College Savings Plan may take advantage of the deduction for the last time in the 2013 tax year.
Families who have not yet established a College Savings Plan can consult with a Certified Financial Planner before year’s end to fund the plan and enjoy the deduction. Distributions from NC 529 plans, for allowable expenses, will remain tax-free. Tuition and books are just a few of the expenses that qualify.
Parents and guardians have other options when it comes to paying for college in North Carolina. Education trusts and gifting for college expenses still offer tax advantages. Learn about the benefits of education trusts, such as tax-deferred growth. Giving money to a college student, when done properly, will qualify for the donor’s gift tax annual exclusion. Also, payments of tuition directly to an educational institution have an unlimited exclusion from gift tax. Since the North Carolina gift tax was repealed in 2009, taxpayers need only be concerned about federal requirements. Here are a few more benefits to making gifts for college expenses in North Carolina.
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