Increase IRC 529 education savings income tax deduction

2025 Regular Session

LC 4225 would raise the state tax deduction for 529 plan contributions, boosting savings for families and potentially broadening access to higher education.

(LC) Draft Ready for Delivery

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Quick overview

Bill number: LC 4225

Title: Increase IRC 529 education savings income tax deduction

Status: Draft ready for delivery (LC)

Introduced: January 1, 2025

Subject: Revenue, Taxation, Education, University/System of Colleges, State and Schools

LC 4225 proposes to increase the state-level income tax deduction for contributions to IRC 529 education savings plans. IRC 529 plans are tax-advantaged education savings accounts used to fund qualified higher education and certain other educational expenses.

Purpose and intent

The primary goal is to encourage families and individuals to save for education by expanding the tax relief associated with 529 plan contributions.

By increasing the deduction, the bill aims to make education savings more attractive and potentially broaden participation across income groups.

This aligns with broader objectives around higher education access and affordability within the state.

Key provisions (pending final text)

The bill would increase the state income tax deduction for 529 plan contributions.

Specific details—such as the new deduction cap, whether indexing for inflation is included, eligibility rules, caps per beneficiary or per taxpayer, and any carryforward provisions—will be defined in the final draft of the measure.

As of the draft stage, the exact fiscal parameters and administrative mechanisms (e.g., how the deduction interacts with other tax credits or deductions) are not yet disclosed.

Who is affected

Individuals and families contributing to 529 education savings plans within the state, especially those seeking to maximize tax benefits from contributing to such plans.

State tax revenue and policy administration will be affected due to changes in deductible contributions and the resulting impact on taxable income calculations.

Beneficiaries of 529 plans (students/dependents) indirectly benefit through potentially increased savings for qualified education expenses.

Procedural and timeline notes

Drafter Assigned: January 1, 2025

Key actions in progression:

January 1, 2025: Drafter assigned
March 17–18, 2025: Drafts moved through legal review, final drafter review, input/proofing, and assembly readiness

Current status: Draft is prepared for delivery to the Assembly; no final vote or enacted status yet.

Next steps for readers

Review the final bill text when available to confirm:

the new deduction amount and any caps/indexing
eligibility rules (residency, beneficiaries, account types)
interaction with other state tax provisions
effective date and any transition provisions

Monitor committee hearings and fiscal impact analyses to understand potential revenue implications and administrative considerations.

Bill