North Carolina’s 529 College Savings Plan

The 2006 General Assembly enacted legislation to allow a deduction of up to $750 ($1,500 on a joint return) for amounts contributed to the Parental Savings Trust Fund (North Carolina’s 529 Plan).  The deduction was effective for tax years beginning on or after January 1, 2006, and was available only if your federal adjusted gross income was less than the following amounts shown for your filing status (Married filing jointly/Qualifying widow(er)- $100,000; Head of household - $80,000; Single - $60,000; Married filing separately - $50,000).  The legislation was subsequently amended to increase the maximum deduction for contributions to the Fund to $2,000 ($4,000 on a joint return) effective for tax years beginning on or after January 1, 2007.

The 2007 General Assembly amended the law by removing the adjusted gross income limitations and increasing the maximum deduction for contributions to the Fund to $2,500 ($5,000 on a joint return).  Therefore, for tax years beginning on or after January 1, 2007, you may deduct up to $2,500 ($5,000 on a joint return) if you made a qualifying contribution to the Fund regardless of the amount of your adjusted gross income. Although the 2007 General Assembly reinstated the adjusted gross income limitation effective for tax years beginning on or after January 1, 2012, the 2011 General Assembly repealed that provision. For tax years beginning on or after January 1, 2012, the deduction remains the same.

Amounts rolled over to North Carolina's 529 plan from another state's 529 plan are considered contributions to the North Carolina plan.  You must add back to federal adjusted gross income any contributions that were previously deducted and were withdrawn but not used to pay for the qualified higher education expenses of the designated beneficiary, unless the withdrawal was made without penalty under section 529 of the Code due to the death or permanent disability of the designated beneficiary.

For tax years beginning on or after January 1, 2014, this deduction is no longer available.