Indiana’s 529 Savings Plan Gets a Helpful Refresh
Published on by Steve Shoemaker in State Local Tax, Tax Services
In May 2024, Indiana announced it was rebranding the Indiana CollegeChoice 529 Savings Plan to Indiana529 Savings Plan. The new name and revised look reflect the expansion of Internal Revenue Code (IRC) Section 529 plans in recent years to provide more opportunities for families to save for education. Saving and paying for higher education can be challenging, but a few new rules in Indiana will make it easier for students and their families.
What’s a 529 plan?
An IRC Section 529 plan allows a person to make cash contributions to an account on behalf of a beneficiary for the payment of qualified higher education expenses. Qualified higher education expenses include tuition, fees, reasonable room and board (if enrolled at least half-time), books, supplies, and equipment required by a post-secondary educational institution for enrollment or attendance. Special need services could also qualify as qualified higher education expenses.
How can Indiana residents benefit?
The Indiana529 Savings Plan also allows up to $10,000 per beneficiary, per taxable year to be distributed for K-12 in-state tuition at a public, private, or religious school as qualified higher education. Additionally, withdrawals used for fees, books, supplies, and equipment required for participation of a designated beneficiary in an apprenticeship program registered and certified with the Secretary of Labor under section 1 of the National Apprenticeship Act are qualified withdrawals.
Indiana residents can claim a 20% state tax credit on up to $7,500 in annual Indiana529 Savings Plan contributions for a maximum credit of $1,500. Like IRA contributions, Indiana529 contributions can be made up to the April 15th tax deadline of the following year. However, Indiana has recently clarified that if there is an error with the contribution, the effective date of the contribution is the date the contribution is completed without error, not the day on which the contribution was first attempted. Since waiting until last minute on April 15th to make the prior year contribution could cause disappointment, we always recommend making your Indiana529 Savings Plan contributions early.
The bottom line on 529 Plans
In short, the new Indiana529 Savings Plan enables greater flexibility in saving for the educational needs of current and future students by removing the need to predict exactly how much a child will be required to pay for their future schooling. With proper planning, unwanted tax consequences from slightly overfunding the account can be avoided.
There’s always more to learn about the intricacies of 529 plans and the ever-changing financial landscape. Check out this overview of the new gift limits for 529 plans.
Curious about how you can relieve the financial burden of education for your loved ones, all while saving money on taxes? Connect with our financial planning pros to find the strategy that fits your situation.
More resources
If you’re interested in other ways to support your loved ones and save on taxes, check out our article on simple and complex trusts. We also have resources on other tax credits and incentives for you to explore.
For an in-depth dive into planning your legacy, download our free 2024 Estate Planning Guide.
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