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 are similar to the federal tax benefits:
- Contributions are eligible for the annual gift tax exclusion of $19,000 in 2025 ($38,000 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 $95,000 ($190,000 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; however, rollover distributions to a Roth IRA or an ABLE account are not considered qualified expenses for state income tax purposes
- The earnings portion of a non-qualified distribution is taxed at the beneficiary’s rate plus a 10% federal tax penalty
- It is unclear whether withdrawals for K-12 tuition, apprenticeship program expenses or qualified education loan payments are considered qualified higher education expenses for Massachusetts state tax recapture purposes
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
