Section 529 College Savings Plan Credit and Subtraction

First special session, omnibus tax bill (17-4727)

The bill allows a non-refundable income tax credit or an income tax subtraction for contributions to any states
section 529 college savings plan or prepaid tuition plan. A taxpayer may claim either the credit or the
subtraction, but not both.
529 Plan Credit
For individual filers and married couples, the credit equals 50 percent of contributions, up to a maximum of
$500. The table below shows examples of the credits allowed at different contribution rates and income levels.
Individual, 1 dependent Married Couple, 2 dependents
Income (AGI) $500 in $1,000 in $500 in $1,000 in
Contributions Contributions Contributions Contributions
$20,000 $250 $500 $0 $0
$40,000 $250 $500 $250 $500
$65,000 $250 $500 $250 $500
$90,000 $200 $200 $250 $350
$115,000 $0 $0 $250 $250
$140,000 $0 $0 $200 $200
$165,000 $0 $0 $0 $0

For both individual and married couples, the maximum credit is phased out as income increases. For individual
filers, the maximum credit is phased out by two percent of adjusted gross income in excess of $75,000. The
credit is fully phased out for individual filers at $100,000 of adjusted gross income.
Income range (AGI) Maximum Credit (Single filers)
Up to $75,000 $500
$75,001 to $100,000 $500 minus 2% of AGI in excess of $75,000
$100,001 and above 0

For married couples filing joint returns, the maximum credit is phased out in two stages, and is fully phased out
when AGI reaches $160,000.
Income range (AGI) Maximum Credit (Married Couples Filing Joint Returns)
Up to $75,000 $500
$75,001 to $100,000 $500 minus 1% of AGI in excess of $75,000
$100,001 to $135,000 $250
$135,001 to $159,000 $250 minus 1% of AGI in excess of $135,000
$160,000 and above $0

529 Plan Subtraction

Allows a taxpayer to subtract up to $1,500 ($3,000 for married joint filers) of contributions to any states
section 529 college savings plan or prepaid tuition plan. The subtraction excludes amounts that are rolled-over
from other college savings plans. The subtraction is limited to taxpayers who do not claim the 529 Plan credit.
MN Department of Revenue estimates:
fiscal year 2018: $10.0 million income tax reduction ($7.5 million credit; $2.5 million subtraction)
fiscal year 2019: $10.4 million income tax reduction ($7.8 million credit; $2.6 million subtraction)
fiscal year 2020: $10.6 million income tax reduction ($8.0 million credit; $2.6 million subtraction)
fiscal year 2021: $11.0 million income tax reduction ($8.3 million credit; $2.7 million subtraction)
House Research Department; May 23, 2017
source: Department of Revenue estimate