The Maine 529 Tax Deduction for ME Residents

Rules for Claiming a Maine State Income Deduction for Funding a 529 Savings Plan

Overview of the Maine 529 Income Tax Deduction:

Maine residents contributing to ANY state's Section 529 plan receive a state income tax deduction of up to $250 per beneficiary, per tax return. If a Maine resident contributes on behalf of multiple beneficiaries (children), they are entitled to multiple deductions, up to the limit of $250 per child.

Couples filing jointly do not receive separate deductions.

In other words, if a couple contributes more than $250 for any one beneficiary, they are limited to a $250 deduction for that beneficiary on their state income tax return.

The Maine 529 savings plan 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). However, the deduction is limited to individuals with a Federal adjusted gross income of less than $100,000 (or $200,000 for couples filing jointly).

Value of the Maine 529 Savings Plan Tax Deduction:

Maine residents trying to decide whether or not they should use a Section 529 savings plan versus other savings vehicles need to account for the potential tax savings on their Maine state income tax deduction for contributing. Currently, Maine does not offer a tax deduction for contributing to other college savings accounts such as a Coverdell Education Savings Account (ESA) or UTMA Custodial Account.

Considering that the top income tax bracket in Maine is 8.50%, each $250 contribution to a Section 529 savings plan may save a taxpayer up to $21.25 at tax time.


Claiming the Maine Section 529 Savings Plan Tax Deduction:

Residents can claim the Maine 529 tax deduction on Line 2H of their Maine Form 1040ME.


Reference and Documentation:

Additional information on the Maine 529 tax deduction can be found on the Maine Department of Revenue's website and the official Maine FAME NextGen 529 Savings Plan website.