Maryland Prepaid College Trust Tax Benefits

Maryland Tax Benefits

The Maryland Prepaid College Trust offers hard to beat tax benefits for account holders.  Contributions made within one calendar year qualify account holders for a Maryland State income deduction of up to $2,500 a year per account.  In addition, the investment grows tax deferred at the State and federal level and when the funds are used for eligible college expenses, the earnings are state and federally tax free.

Contributions in excess of $2,500 within one calendar year to the Maryland Prepaid College Trust may be carried forward and deducted in future years. For example, if an account holder made a $10,000 lump sum contribution in year one, that would equal four consecutive yearly deductions of $2,500 per year.

While the ability to enjoy tax deferred growth and tax free distributions (as long as the funds are used for eligible college expenses) are inclusive to all 529 plans, the ability to qualify for a Maryland State income deduction on contributions is available only with the College Savings Plans of Maryland.

Federal Tax Benefits

Any earnings are federally tax-free when used toward eligible college expenses.