529 Tax Credit Included in 2016 Tax Bill Compromise
St. Paul, MN — Senator Greg Clausen (DFL-Apple Valley) has worked for several years to reinstate a state match of up to $500 to implement a Minnesota tax incentive for a 529 College Savings Plan. Sen. Clausen is pleased the legislation is part of the 2016 Tax Bill compromise.
The amount of the state match would be dependent on income level and investment. The state match can only be used when attending a Minnesota higher education institute or at a college which offers reciprocity to Minnesota students. Minnesota is currently only one of five states not offering a tax incentive for 529 College Savings Plans.
“With college costs and student debt on the rise, reinvesting in our children’s futures with the Minnesota’s 529 College Savings Plan just makes sense,” Sen. Clausen said. “The funding provides incentives for families trying to save for future higher education expenses and it will bring down the cost of student college loan debt.”
The average Minnesota graduate has $31,000 in student loan debt: the third highest in the nation. More than 70% of Minnesota graduates leave college with student loan debt, which is the fifth highest percentage of students nationally. Minnesota discontinued the matching grant program in July 2011; the Clausen legislation, which has bipartisan support, will finally reinstate this important program.
“The 529 Savings Plan Grant is one way to bring down student debt and provide a tax break to families who are saving for college,” Sen. Clausen said. “To bring down the cost of the program, I’ve made some changes to provide greater tax breaks for lower-income families while still providing sound incentives for those earning less than $160,000 after taxes.”
The minimum contribution is $25, there are no income limitations, and the plan allows the beneficiary to go to a public or private college or university, trade, or graduate school. “The funds can be used for tuition, fees, books, and supplies,” Sen. Clausen said.