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The Oregon 529 Plan Deduction for OR Residents

Rules for Claiming the $2,000 Income Tax Deduction for Funding an OR 529 Plan

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Overview of the Oregon 529 Plan Tax Deduction:

Oregon residents who contribute to an Oregon 529 plan receive a state income tax deduction of up to $2,000 "per contributor." However, if a couple files a joint tax return, the allowable deduction is doubled to $4,000 per return.

This means that if an Oregon couple filing a joint return contributes more than $4,000 on behalf of multiple beneficiaries (children), they are still only allowed to deduct a maximum of $4,000 on their tax return in that tax year. However, Oregon does offer a four year carryforward provision, which allows contributions not previously deducted to be used in the subsequent four years, as long as future annual deduction limits are not met by new contributions.

Value of the Oregon 529 Plan Tax Deduction:

Oregon residents trying to decide whether to use the Oregon 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 Oregon income tax rate is 9.00%, each deduction of $2,000 can save a taxpayer up to $180 at tax time.

Oregon 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 Oregon 529 Plan Tax Deduction:

Residents can claim the Oregon 529 plan tax deduction on line 18 of their Oregon Form 40.

The Oregon 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 Oregon 529 Plan tax deduction.

Reference and Documentation:

Additional information on the Oregon 529 plan tax deduction can be found on the Oregon Department of Revenue's website and the official Oregon 529 Network website.

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