(INDIANAPOLIS) – You’ll be able to save more money for your kids’ college expenses next year.
Legislators have increased the state income tax credit from a $1,000 maximum to $1,500 for money you put into a College Choice 529 savings plan. The increase takes effect next year and will show up on your tax return the year after.
The credit represents $5 for every $100 you put in. That means you’ll be able to max out the credit with $7,500 in contributions, up from the current $5,000.
Withdrawals from 529 plans are tax-free as long as they pay for college expenses. Higher Education Commissioner Teresa Lubbers says Indiana’s version is one of the broadest in the country: the money can be used not just for tuition, but housing and textbooks. And it can be spent not just at state universities, but private universities and technical schools.
State Treasurer Kelly Mitchell predicts the increased tax credit will encourage more people to take advantage of the program. Lubbers says starting to save early makes people more likely to go to college when the time comes, instead of being intimidated by the cost.
This year is the 25th anniversary of Indiana’s 529 plan. The $1,000 tax credit took effect in 2007, 10 years after the program began.
400,000 families have an average of $16,000 in Indiana college savings accounts, for a total of nearly $7 billion on deposit.