Tax Benefits of Massachusetts 529 Plans

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Mark Kantrowitz

By Mark Kantrowitz

June 20, 2023

Massachusetts 529 plans offer the standard federal and state tax benefits, as well as a state income tax deduction based on contributions to the state’s 529 plan.

Like most 529 plans, the Massachusetts 529 plan has state tax benefits that mirror the federal tax benefits:

  • Contributions are eligible for the annual gift tax exclusion of $17,000 ($34,000 for a couple giving jointly)
  • Contributions above the annual gift tax exclusion limit are eligible for 5-year gift tax averaging, permitting lump sum contributions of up to $80,000 ($160,000 for a couple giving jointly) without incurring gift taxes or using up the lifetime gift tax exclusion
  • Earnings accumulate on a tax-deferred basis
  • Qualified distributions for K-12 tuition and qualified higher education expenses are entirely tax-free
  • The earnings portion of a non-qualified distribution is taxed at the beneficiary’s rate plus a 10% federal tax penalty

Contributions to the Massachusetts 529 plan are tax-deductible on Massachusetts state income tax returns.

  • The Massachusetts state income tax deduction is up to $2,000 per year for taxpayers who are married filing jointly and $1,000 per year for single filers
  • There is no carryforward for contributions above the tax deduction’s annual limit



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