State Updates

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Indiana state income tax credit

Indiana taxpayers may receive a state income tax credit equal to 20% of their contributions to a CollegeChoice 529 account, up to $1,000 per year ($500 for married filing separately) through December 31, 2022. Contributions by Indiana taxpayers made on or after January 1, 2023, will qualify for the 20% tax credit, with a new maximum of up to $1,500 ($750 for married filing separately).

Indiana Department of Revenue Information Bulletin #98 provides an overview of the tax credit with respect to CollegeChoice 529, detailing who qualifies, the amounts, eligible contributions, and other important information to consider. The Bulletin will be updated to reflect the increased maximum tax credit after it goes into effect during the 2023 tax year. There are no changes in the tax credit for contributions made in 2022.

Other Updates

Effective January 1, 2022, the gift tax exclusion amount increased from $15,000 to $16,000; individuals can invest up to $16,000 ($32,000 for married couples) per beneficiary without incurring gift tax consequences. Additionally, individuals can now contribute up to $80,000 per beneficiary in a single year ($160,000 for married couples) and take advantage of five years’ worth of tax-free gifts at one time. Please refer to our most recent Plan supplement for more information.

Are you applying for an Indiana income tax credit?

Indiana taxpayers can get a state income tax credit equal to 20% of their contributions to a CollegeChoice 529 account, up to $1,000 per year ($500 for married filing separately).1 Information Bulletin #98 provides an overview of the Tax Credit with respect to College Choice 529, detailing who qualifies, the amounts, eligible contributions, and other important information to consider.

On December 20, 2019, the SECURE Act was signed into law. The SECURE Act amended Section 529 to permit withdrawals to pay for expenses for apprenticeship programs registered and certified with the Secretary of Labor under the National Apprenticeship Act (Apprenticeship Program Expenses) and to pay principal and interest on certain qualified education loans (Education Loan Repayments) for a beneficiary or any of the beneficiary’s siblings. The loan repayment provisions apply to repayments up to a lifetime maximum of $10,000 per individual. The effective date of the SECURE Act is January 1, 2019.

In March 2020, Indiana Code Section 6-3-3-12 was amended (Amendment) to:

  • exclude Education Loan Repayments from Indiana Qualified Higher Education Expenses; and
  • revise the definition of an Indiana taxpayer to include married individuals filing separately.  The maximum annual credit allowed for a married taxpayer filing separately is $500.

These changes are effective January 1, 2020.  This means that, for the tax year beginning January 1, 2019, a distribution to make an Education Loan Repayment will not be subject to recapture of the Indiana state income tax credit but, beginning January 1, 2020, a distribution to make an Education Loan Repayment will be subject to recapture of the Indiana state income tax credit.  In addition, any earnings distributed will be included in your Indiana adjusted gross income for the applicable tax year. 

The Amendment did not address Apprenticeship Program Expenses.  Distributions used to pay those expense are considered tax free distributions for both federal and Indiana tax purposes.

As with any change to law, we encourage account owners to consult a qualified tax advisor regarding the application of federal and state tax laws to their particular situation.  Please see the Disclosure Booklet for detailed information.

If you have questions about the CollegeChoice Advisor 529 Savings Plan, you can reach our Customer Service team by phone at 1.866.485.9413, Monday through Friday from 8 a.m. to 8 p.m., Eastern Time.

 

1This credit may be subject to recapture from the account owner (not the contributor) in certain circumstances, such as rollovers to another state's 529 plan, federal nonqualified withdrawals, withdrawals used to pay elementary or secondary school tuition for a school outside of Indiana, or qualified education loan repayments as described in the Disclosure Booklet.