Division of TaxationPrior to Tax Year 2022 contributions to 529 plans were not deductible, but the money grew tax-free if used for qualified educational expenses. A rollover from one account to another was considered a qualified distribution within the meaning of N.J.S.A. 54A:6-25 as long as it met the requirement in section 529(c)(3)(C)(i) of the Internal Revenue Code.
For Tax Year 2022 and forward, The Ó£»¨ÊÓƵ College Affordability Act allows for three Income Tax deductions for those who file tax returns showing gross income of $200,000 or less. Deductions include contributions to an NJBEST 529 savings plan, payments made for an NJCLASS student loan, and tuition costs for Ó£»¨ÊÓƵ colleges and universities.
Ó£»¨ÊÓƵ Better Educational Savings Trust (NJBEST)
You can deduct up to $10,000 of contributions made during the year into an account.
Example: You contribute $1,000 per month, beginning in January. If your gross income is $200,000 or less, you can deduct the maximum amount of $10,000.
The may offer additional NJBEST 529 College Savings Plan benefits to Ó£»¨ÊÓƵ residents.
Ó£»¨ÊÓƵ College Loans to Assist State Students (NJCLASS)
You can deduct up to $2,500 of principal and interest paid on student loans during the year under if your gross income is $200,000 or less.
Ó£»¨ÊÓƵ Higher Education Institution Tuition Costs
If you, your spouse, or your dependent enroll in and attend a Ó£»¨ÊÓƵ institution of higher education, you can deduct up to $10,000 for tuition costs.
Applicable Laws and Rules
P.L. 2021, c.128