In this week’s video, Tom discusses how saving for college in a New Jersey 529 account could provide a new tax deduction for folks. There are requirements that must be met by NJ taxpayers in order to qualify for this deduction.
Tom also addresses a common worry we hear, “well what if my child doesn’t go to college?”, by explaining how 529 accounts are becoming more flexible.
Tune in to hear if this is something you can take advantage of!
New Tax Deduction For New Jersey 529 Accounts – Full Transcript
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Tom Mullooly: Good news for some folks in New Jersey who are saving money through a 529 account. Stick around.
Welcome to the Mullooly Asset Show. I’m your host, Tom Mullooly. Today we want to talk about New Jersey 529s. The state of New Jersey now offers a tax break for the first time ever for folks who are putting money in a 529 for education expenses for someone in their family. And by way of review, you don’t necessarily have to have a 529 for a son or daughter.
Of course, you could start one for a grandchild, but you could also have a 529 account for yourself or your spouse. So New Jersey taxpayers, they can now deduct up to $10,000 a year from their New Jersey taxable income if they’re putting this money into a 529.
So here’s an example. Suppose your gross income for New Jersey, not federal, but for New Jersey, your gross income is $150,000 and you put $10,000 into a 529 account during the year. Your income for New Jersey is now not 150, but actually 140. So there is a small tax break that you do get. It’s not tax credit, but it is something where there used to be nothing. So that’s actually pretty good. But as usual, with something that comes from the government, there are a couple of strings that you need to know about.
The first is, it’s not available to folks who have an income that exceeds $200,000. That’s a problem because living in New Jersey, you need a lot of income. So the other part of this is, the other string is you have to do the 529 through NJBEST, which is the New Jersey version of the 529 account. So you can get a 529 account that’s based in New York, Connecticut, Nebraska, you can pick really from any state. But if you want to get this tax deduction, you have to do the NJBEST plan.
Now, you need to know something about NJBEST. You can do it direct or you can open an NJBEST account through a broker or an advisor. We don’t recommend going through a broker or an advisor because you’re going to pay a commission and you’re probably going to have some additional fees. You can do this right through the NJBEST website.
It’s very easy, and you can just follow the steps. If you need help going through that, you can talk to an advisor like us. We’ll walk you through it, and there’s not going to be any kind of charge for that. And the third string, of course, you have to be a New Jersey resident, a New Jersey taxpayer.
One of the other questions that comes up is, what can we use this 529 account for? Used to only be for higher education for college. In the last few years, things have become a little more relaxed. You can use the money that’s in a 529 account for high school costs, for say you’ve got a student who’s going to a private high school or a Catholic school. You can use money that’s in a 529 for these expenses that do come up. So they have broadened or given a lot more latitude to what you can use the 529 accounts for.
And we’ve mentioned in a podcast, they’re continuing to make more and more changes to 529s. It’s worth taking a look at if you’ve got someone in your family that may be going to college down the road.
Thanks for tuning in to today’s episode. Make sure to check back for our next episode coming up.