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The Oklahoma 529 Plan Deduction for OK Residents

Rules for Claiming the $10,000 Income Tax Deduction for Funding a OK 529 Plan

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Overview of the Oklahoma 529 Plan Tax Deduction:

Oklahoma residents who contribute to an Oklahoma 529 Plan receive a state income tax deduction of up to $10,000 "per tax return." If a couple files a joint tax return, the deduction is doubled to $20,000 per return.

This means that if an Oklahoma couple filing a joint return contributes more than $20,000 on behalf of multiple beneficiaries (children), they are still only allowed to deduct a maximum of $20,000 on their tax return in that tax year. However, Oklahoma does offer a five-year carryforward provision, which allows contributions not previously deducted to be used in the subsequent five years, as long as the annual deduction limit is not met by new contributions.

An additional feature of the Oklahoma 529 Plan not found in most other plans, is its April 15th contribution deadline. Most states' plans require contributions to be made by December 31st to qualify for the deduction.

Value of the Oklahoma 529 Plan Tax Deduction:

Oklahoma residents trying to decide whether to use a Oklahoma 529 plan versus another state's Section 529 plan need to account for the potential tax savings of contributing to their in-state plan. Considering that the top Oklahoma income tax rate is 5.50%, each deduction of $10,000 can save a taxpayer up to $550 at tax time.

Oklahoma does not currently offer a tax deduction to residents contributing to out-of-state plans or other types of college savings accounts such as a Coverdell Education Savings Account (ESA) or UTMA Custodial Account.

Claiming the Oklahoma 529 Plan Tax Deduction:

Residents can claim the Oklahoma 529 plan tax deduction on line C6 of their Oklahoma Schedule 511-C.

The Oklahoma 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 on the Oklahoma 529 Plan tax deduction.

Reference and Documentation:

Additional information on the Oklahoma 529 plan tax deduction can be found on the Oklahoma Tax Commission's website and the official Oklahoma College Savings Plan website.

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