529 Plan Tax Benefits

Save on your taxes and save for college. It’s a win-win.

Tax savings are among the biggest benefits of a 529 plan with the Education Plan. We break down the benefits here so you know exactly what to expect.

529 Federal Tax Benefits

Earnings on your 529 account and withdrawals from it are not subject to federal taxes when used for qualified educational expenses. This means that you will pay no federal income taxes as your account grows over the years and no federal income taxes when your beneficiary removes funds to use for qualified higher education expenses, including tuition, room and board, books and much more.

529 State Tax Benefits

New Mexico Residents

In addition to the federal tax benefits, 100% of contributions to your 529 account with The Education Plan are deductible from your New Mexico state taxable income each year. New Mexico is one of only four states in the nation to provide an unlimited state tax deduction for contributions to its 529 plan. (The Education Plan is New Mexico’s official 529 plan. Contributions to other states’ 529 plans are not tax deductible).

If you are a New Mexico resident, earnings on your 529 account and withdrawals from it are not subject to state taxes when used for qualified educational expenses.*

*New Mexico does not permit state tax deductions for contributions used to pay for K-12 tuition payments and transfers to an ABLE account. It likely will not allow deductions for contributions used to pay for student loan repayments and apprenticeship programs. The amounts deducted for these purposes may be recaptured as state taxable income in subsequent years. Click here for more information.

Non-New Mexico Residents

If you are not a resident of New Mexico, you will still receive the federal tax benefits outlined above. Some states have tax benefits for contributions to an out-of-state 529 plan. The map below can help you determine your state’s tax benefits and which plan is right for your family. Before investing, we recommend consulting a tax advisor to determine your state’s tax benefits and if it imposes any limitations on the use of 529 contributions.

Understanding the 529 Tax Landscape State by State

Get the most out of your state tax benefits.

New Mexico

Home of The Education Plan

Tax parity*

These states offer tax deductions or credit for contributions to any 529 plan, regardless of state.

*Please Note: State tax benefits in tax parity states apply to contributions in any 529 plan.

Tax neutral

These states do not offer tax deductions or credit for 529 contributions, or have no state income tax.

In-state tax benefit

These states offer tax deductions or credit for contributions to the
in-state 529 plan only.

Gift Taxes

A contribution to a 529 plan is considered a completed gift from the contributor to the beneficiary. The first $16,000 ($32,000 for a married couple filing jointly) given to each beneficiary each year is excluded from federal gift taxes. (Other gifts given to the same beneficiary must also be taken into account when calculating the total gift in a given year.)

A special provision in the IRS code allows you to use five-year gift tax averaging when contributing to a 529 plan. This means you can contribute up to $80,000 (or $160,000 for a married couple) to a 529 account in a single year and choose to have it treated as if you had given it over a five-year period for tax purposes. This can be a helpful way to jump-start a 529 account early on without incurring federal gift taxes.

For additional information about potential gift tax consequences, please refer to the Plan Description. We recommend consulting with a tax advisor about gift taxes and your specific situation before investing.

Using Your Tax Refund to Fund Your 529 Account

Reinvesting your annual tax refund into your 529 account is a simple and effective way to grow your account every year. While it can be tempting to spend a refund on a single indulgent purpose, putting it into a 529 account will put it to work for you and pay dividends a purchase never will.

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For more information about The Education Plan, call 1.877.337.5268 or view the Plan Description and Participation Agreement, which includes investment objectives, risks, charges, expenses, and other important information; read and consider it carefully before investing.

Please Note: Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s qualified tuition program. You also should consult a financial, tax, or other advisor to learn more about how state-based benefits (or any limitations) would apply to your specific circumstances. You also may wish to contact directly your home state’s 529 plan(s), or any other 529 plan, to learn more about those plan’s features, benefits and limitations. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision.

The Education Plan is administered by The Education Trust Board of New Mexico. Ascensus College Savings Recordkeeping Services, LLC, the Program Manager, and its affiliates, have overall responsibility for the day-today operations, including investment advisory, recordkeeping and administrative services. The Education Plan’s portfolios invest in: (i) mutual funds; (ii) exchange traded funds; and/or (iii) a funding agreement issued by New York Life. Investments in The Education Plan are not insured by the FDIC. Units of the portfolios are municipal securities and the value of units will vary with market conditions.

Investment returns will vary depending upon the performance of the portfolios you choose. You could lose all or a portion of your money by investing in The Education Plan depending on market conditions. Account owners assume all investment risks as well as responsibility for any federal and state tax consequences.

Ugift is a registered service mark of Ascensus Broker Dealer Services, LLC.

The Education Plan® and The Education Plan® Logo are registered trademarks of The Education Trust Board of New Mexico used under license.

All other marks are the exclusive property of their respective owners.

Not FDIC-Insured. No Bank, State or Federal Guarantee. May Lose Value.