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S 13

Tax Deduction for Employer Contributions to 529 Accounts

2025-2026 Regular Session Introduced by Luke Rankin

Allows state tax deductions for employee 529 contributions and for employer matching contributions up to $1,000 per employee, plus deduction treatment for rollovers.

Referred to Committee on Education
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Bill Summary · S 13

Summary — S 13: Tax Deduction for Employer Contributions to 529 Accounts

Bill number: S 13
Title (as provided): Tax Deduction for Employer Contributions to 529 Accounts
Introduced: March 3, 2025
Sponsor: James Skoufis (primary)
Status: Referred to Committee on Education; hearing scheduled (03/25/2025); other legislative action entries listed below.
Classification: Bill

Note on source documents: The materials provided include two different, unrelated texts: (1) language from a Massachusetts proposed constitutional amendment concerning “rainy day” (stabilization) fund withdrawals, and (2) statutory language (modeled on a South Carolina amendment) that would change tax treatment of 529 (college savings) accounts to allow employer matching contributions to be state-tax deductible. This summary focuses on the 529/employer-contribution provisions matching the bill title. The constitutional-amendment text is unrelated to the 529 topic and appears to be included in error.

Purpose

To encourage employer participation in employees’ Section 529 college-savings accounts by allowing employer matching contributions to be deductible for state income tax purposes and by clarifying state income tax deduction rules for 529 contributions and rollovers.

Key provisions

  • Employee contributions: Individuals (residents or required nonresidents) may deduct contributions to qualified 529 investment trust accounts from state taxable income, up to the maximum contribution limits allowed under Section 529 of the Internal Revenue Code.
  • Employer matching: Employers may match deductible employee contributions to an employee’s 529 account, with employer matching deductible up to $1,000 per employee. Employer contributions made under this provision would be deductible from the employer’s state taxable income.
  • Rollovers: Funds rolled into a 529 account from another qualified plan are deductible to the extent they were not previously allowed as a state deduction.
  • Timing of deductions: State income tax deductions for contributions and rollovers may be taken for the taxable year in which the contributions occur and up to April 15 of the following year (or the state return due date, excluding extensions), whichever is longer.
  • Definitions: “Qualified plan” is defined as any plan qualified under Section 529 of the Internal Revenue Code of 1986, as amended.
  • Effective date (as in the model language): Applies to tax years beginning after 2025; takes effect upon the governor’s approval.

Who would be affected

  • Employees who contribute to 529 plans: Likely greater incentive to save for education because contributions and employer matches may be deductible for state income tax purposes.
  • Employers: May choose to offer matching contributions (capped at $1,000 per employee) and would receive a state tax deduction for those matches.
  • State fiscal authorities: Reduced state income tax revenue to the extent employer and additional employee deductions increase; administrative responsibility for processing new deductions and payroll/reporting changes.
  • 529 program administrators: Potential uptick in contributions and accounts to administer.

Fiscal and administrative considerations

  • Fiscal impact: Likely a revenue loss to the state (magnitude depends on take-up by employers and employees). A fiscal note would be required to estimate revenue effects.
  • Administration: Employers will need payroll/benefits processes to make and report matches; tax agencies will need guidance/forms to permit employer deductions and track rollovers.

Procedural / timeline notes

  • Referred to Committee on Education (03/03/2025). Hearing scheduled 03/25/2025 (per materials).
  • Related/companion measures listed (e.g., A 8956); several prior-session or replacement bills referenced (SD 2530, S 4360, etc.).
  • If enacted in the form shown (statutory change to state tax code), application begins for tax years after 2025 and the act takes effect upon gubernatorial approval.

Final note

Because the provided packet included an unrelated constitutional amendment text (requiring a supermajority to tap a stabilization fund), readers should treat that text as separate. If you want, I can: (a) produce a separate summary of the constitutional amendment language; (b) draft a fiscal-note outline estimating revenue impacts from the 529 employer-deduction proposal; or (c) locate the bill text as filed in the specific state legislature for confirmation. Which would you prefer?

Compiled from official sources — confirm details with the bill’s official record.

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