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Georgia Tax Deduction for Section 529 Contributions

Rules and Overview of the Section 529 Deduction for Georgia Residents

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Tax Deduction for Georgia Residents Using a Section 529 Plan :

The state of Georgia offers a sizable tax deduction for residents who contribute to the Georgia Higher Education Savings Plan. For the 2008 tax year, a maximum deduction of $2,000 per recipient is offered.

Note: The deduction is PER RECIPIENT. A donor who contributes on behalf of five children could theoretically take five $2,000 deductions on their Georgia return!

Increasing the attractiveness of the Georgia Higher Education Savings Plan is the fact that a resident doesn't have to itemize their other deductions to claim this unique deduction. In other words, even if you cannot deduct anything else, you're still be able to subtract your contributions to the plan from your gross income on your Georgia personal income tax return.

As with most states, distributions from the Georgia Higher Education Savings Plan that are used for other things besides qualified education expenses are subject to Georgia and Federal income tax.

Value of the Georgia Section 529 Tax Deduction:

Residents wrestling with the use of the Georgia Section 529 plan versus other savings vehicles need to factor in the potential savings of their in-state income tax deduction. Remember, Georgia residents only receive a deduction for contributing to the Georgia Section 529 plan, not plans from other states.

Considering that the top income tax bracket for a Georgia residents is 6.00%, each contribution of $2,000 could save up to $120 at tax time. In other words, receiving the deduction could be similar to a 6.00% bonus on the amount contributed.

Contribution Deadline:

Deductible contributions for the prior year must be made to the Georgia Section 529 by April 15th of the following year.

Reference and Documentation:

Additional documentation for this deduction is available from both the Georgia Department of Revenue and the Georgia Higher Education Savings Plan website.

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