Contributions made by Dec. 31 to the Pennsylvania 529 College Savings Program can help reduce the tax burden on returns filed next spring, says State Rep. Jim Cox (R-129). Taxpayers can deduct up to $13,000 per beneficiary in PA 529 contributions from Pennsylvania taxable income on state returns for 2012. Married couples filing jointly can deduct up to $26,000 per beneficiary, if each spouse has taxable income of at least the amount deducted. Additionally, family and friends can contribute up to $65,000 in a single year ($130,000 for a married couple filing jointly) for each beneficiary without incurring federal gift tax consequences.
Earnings in a 529 plan are not subject to yearly taxes as they grow, and when used for qualified higher education expenses, earnings are tax-exempt upon withdrawal.
To encourage more families to enroll in a program, free enrollment, a $50 savings, is available for all new PA 529 Guaranteed Savings Plan (GSP) accounts opened by Dec. 31 at the 529 website. Use the code TAXSMART when prompted.