Connecticut Tax Deductions for Education Expenses

Rules for Claiming the Connecticut Section 529 Tax Deduction

Overview of Connecticut Education Tax Benefits:

The state of Connecticut offers one of the higher deduction limits for residents who contribute to a Section 529 plan. For 2008, single taxpayers can deduct up to $5,000 in CHET contributions ($10,000 for couples filing jointly).

Making the Connecticut CHET Plan even more attractive, is the fact that residents who contribute more than the maximum deduction for any year are permitted to “carry it forward” for up to five years. In other words, a single parent who makes a $6,000 contribution to the Connecticut CHET plan could deduct $5,000 for this year, and the remainder in the following year.

As with most states, distributions from the Connecticut Section 529 plan that are used for qualified education expenses are not subject to taxation.

Value of the Connecticut Section 529 Tax Deduction:

If you are a Connecticut resident trying to choose between a Section 529 plan and another college savings vehicle, you need to account for the potential tax savings of contributing to the Connecticut CHET Plan. Remember, Connecticut residents only receive a deduction for contributing to Connecticut’s CHET Savings Plan, not plans from other states.

Considering that the top income tax bracket for Connecticut residents is 5.00%, a contribution of $5,000 could potentially save $250 at tax time. In other words, receiving the deduction could be similar to a 5% bonus on the amount contributed.

Claiming the Deduction:

Contributions by residents to a Connecticut Section 529 plan are deducted on Line 48 of the Connecticut Individual Income Tax Return (Form CT-1040).

Reference and Documentation:

Additional documentation for this deduction is available from both the Connecticut Department of Revenue and the Connecticut CHET Section 529 Plan websites.