The New Mexico College Savings Plan Deduction for NM Residents

Rules for Claiming an Income Tax Deduction for Funding a New Mexico 529 Plan

Overview of the New Mexico 529 Plan Tax Deduction:

New Mexico residents who contribute to a New Mexico 529 Plan receive a state income tax deduction for the entire amount contributed. In other words, New Mexico's 529 plan tax deduction is "unlimited."

The New Mexico 529 Plan tax deduction is an "above the line" income adjustment, meaning residents can claim it even if they do not itemize their other deductions (opting for the standard deduction). There is no income phaseout or maximum on the New Mexico 529 Plan tax deduction.

Value of the New Mexico 529 Plan Tax Deduction:

New Mexico residents trying to decide whether to use one of New Mexico's 529 plans or another state's Section 529 plan need to account for the potential tax savings of contributing to their in-state plan. New Mexico does not currently offer a tax deduction to residents contributing to out-of-state plans.

Considering that the top New Mexico income tax rate is 4.90%, each $1,000 contribution can save a taxpayer up to $49 at tax time. Currently, New Mexico does not offer a tax deduction for contributing to any other types of college savings accounts such as a Coverdell Education Savings Account (ESA) or UTMA Custodial Account.

Claiming the New Mexico 529 Plan Tax Deduction:

Residents can claim the New Mexico 529 plan tax deduction on line 13 of their New Mexico Form PIT-ADJ.

Reference and Documentation:

Additional information on the New Mexico 529 plan tax deduction can be found on the New Mexico Department of the Revenue's website.