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New Jersey 529 Tax Benefit

New Law Takes Effect To Make College More Affordable In New Jersey

New Tax Law Update: 529 Plan Expansion

Last year, the Legislature unanimously approved the College Affordability Act. This law has now taken effect, helping to make college education more affordable for New Jersey middle-class families.

Effective January 1, 2022, New Jerseyans can receive tax benefits when they finance a postsecondary degree. Families with a gross income up to $200,000 are now eligible for a State income tax deduction for up to $10,000 for tuition they pay at a New Jersey college or university. The deduction is available each year starting with payments made in calendar year 2022 for the tuition of the taxpayer or the taxpayers spouse or dependent.

Furthermore, the College Affordability Act provides a new state tax deduction starting in 2022, for up to $2,500 in principal and interest paid towards the balance of a New Jersey College Loan to Assist State Students family loan by families with gross incomes up to $200,000.

In addition to these benefits, the Higher Education Student Assistance Authority announced last year the expansion of NJBEST scholarships for eligible college-bound student beneficiaries of a NJBEST account with a history of consistent contributions over multiple years. The amount of this benefit was doubled starting in June 2021, so student beneficiaries of a NJBEST plan can now receive a one-time scholarship of up to $3,000 when they attend a college or university in New Jersey.

More Help Paying For College

The last tax relief package that was passed including several provisions related to education and financial aid. Here are some key highlights about financial aid changes that may benefit you and your student.

To learn how to set up a NJBEST account and receive your benefits, contact your Access Wealth advisor.

New Jersey College Loans To Assist State Students Loan Program

Beginning in 2022, a taxpayer with gross income of $200,000 or less can deduct from gross income up to $2,500 of principal and interest payments paid on a student loan under the NJCLASS Loan Program. NJCLASS loans are available to New Jersey residents attending an approved undergraduate or graduate school, whether in-state, out-of-state, on-line or abroad.

NJCLASS offers 10 and 15-year ReFi+ refinance loan programs available to NJCLASS, federal Parent PLUS and private educational loan borrowers with a minimum of $5,000 in debt. Refinancing through the NJCLASS program may offer more favorable loan rates and qualify for the new gross income tax deduction.

The annual state tax benefit of the $2,500 deduction for NJCLASS loan repayments ranges from $35 to $159 . The lower a taxpayers income tax bracket, the smaller the New Jersey tax savings. The new in-state tuition deduction is estimated to cost the state between $6.5 million and $11.8 million in lost revenue annually.

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Rollovers From 529 Plans To Able Plans

Account owners can also roll over 529 plan assets into ABLE plan accounts, subject to the annual ABLE plan contribution limit, until December 31, 2025. Rollovers of 529 plan assets into ABLE plan accounts will not be considered taxable events for purposes of New York State taxes. For more details about the Direct Plan’s tax benefits, refer to the Disclosure Booklet and Tuition Savings Agreement.

*Earnings on nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. New York State tax deductions may be subject to recapture in certain additional circumstances such as rollovers to another state’s 529 plan, withdrawals used to pay elementary or secondary school tuition, , or qualified education loan repayments as described in the Disclosure Booklet and Tuition Savings Agreement. State tax benefits for non-resident New York taxpayers may vary. Tax and other benefits are contingent on meeting other requirements. Please consult your tax advisor about your particular situation.

***In the event the donor does not survive the 5-year period, a prorated amount will revert back to the donor’s taxable estate.

  • What are the basics of 529s?


Investment returns are not guaranteed, and you could lose money by investing in the Direct Plan.

© 2022 New York’s 529 College Savings Program Direct Plan.

New Jersey 529 College Savings Plans

New Jersey 529 Benefits

New Jersey has two 529 savings programs, both managed by Franklin Templeton Investments. One 529 plan is direct-sold and available only to New Jersey residents , and the other is sold nationwide through financial advisors .Click on the links below to read more about each NJ 529 plan.

New Jersey 529 Tax Benefit

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Taxable Portion Of A Distribution

The part of a distribution representing the amount paid or contributed to a qualified tuition program doesnt have to be included as income. This is a return of the investment in the plan.

The designated Beneficiary generally doesnt have to include in income any earnings distributed from a qualified tuition program if the total distribution is less than or equal to adjusted qualified education expenses.

To determine if your total distributions for the year are greater or less than the amount of qualified education expenses, you must compare the total of all qualified tuition program distributions for the tax year to the adjusted qualified education expenses. Adjusted qualified education expenses are the total qualified education expenses reduced by any tax-free educational assistance. Tax-free educational assistance includes: the tax-free part of scholarships and fellowship grants veterans educational assistance the tax-free part of Pell grants employer-provided educational assistance and any other non-taxable payments received as educational assistance.

New Jersey College Affordability Act

Beginning with Tax Year 2022 , the New Jersey College Affordability Act allows for three Income Tax deductions on New Jersey returns with a gross income of $200,000 or less. These deductions include contributions to NJBEST, payments made under NJCLASS, and tuition costs for New Jersey colleges and universities.

Contributions to a New Jersey Better Educational Savings Trust

You can deduct up to $10,000 of contributions made during the year into an NJBEST account.

Example: You contribute $1,000 per month, beginning in January, and your gross income is $200,000 or less, you can deduct the maximum amount of $10,000.

Principal and Interest Paid on Student Loans under New Jersey College Loans to Assist State Students

You can deduct up to $2,500 of principal and interest paid on student loans during the year under NJCLASS if your gross income is $200,000 or less.

New Jersey Higher Education Institution Tuition Costs

If you, your spouse, or your dependent enroll in and attend a New Jersey institution of higher education, you can deduct up to $10,000 for tuition costs.

Applicable Laws and Rules

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What Are My Investment Options

The NJBEST 529 College Savings Plan offers a variety of investment portfolios designed for all types of savers, from people new to investing to trading experts. Those who arent too familiar with investing may be interested in age-based portfolios. These options automatically rebalance their asset allocation or the mix of stock and bond funds they invest in over time. When your beneficiary is young, the portfolio will aim for strong returns by investing more in stock funds, which are generally more risky but growth-oriented. As your child gets closer to the college years, however, the portfolio will change gears and focus more on generally less risky options like bond and money market funds to protect what youve earned and still aim for a steady return on your contributions.

All age-based portfolios follow this general trend. However, you can choose from three different tracks based on your risk profile: conservative, moderate and growth. Each one sticks to its risk aim. For example, the conservative option will invest in no stock funds by the time your beneficiary reaches age 17. However, the growth option would still devote 24% of its asset allocation to stock funds.

But if you have a general understanding of the type of asset mix you want to invest in, you may be interested in the plans individual portfolios. The asset mix of these portfolios is meant to stay constant over time. Each invests in different funds based on a specific risk level.

Which States Offer Tax Credits

Tax Plan Offers Flexibility For 529 Users

Indiana, Minnesota, Oregon, Utah, and Vermont provide tax credits, which families can use to offset their state income taxes. These credits, on average, offer greater tax savings to a broader range of families than deductions do. Oregon’s maximum tax credit for joint filers is $300, which can be met with a relatively low contribution of $1,200. For those earning $100,000, the percentage of contribution eligible for tax credit is 25%, but this percentage is higher for families with lower incomes . Minnesota also offers larger benefits to families earning less, as it offers the option of a deduction or a more generous credit. Like Oregon, the tax credit calculation is adjusted by income level. For those earning less than $80,430, the maximum credit of $500 can be earned with a relatively low contribution of $1,000 . The calculations for tax credits in Indiana and Vermont are a little less generous than Minnesota and Oregon, but the dollar amounts are significantly higher than the states with deductions. In Indiana and Vermont, a $3,000 contribution would result in tax credits of $600 and $300, respectively. Indiana has a high $1,000 state tax credit limit, per taxpayer. Vermont’s state tax credit maximum is $500, but this is per beneficiary. Utah employs a relatively low 4.95% of contribution to calculate the tax credit, so a $3,000 contribution would result in a tax credit of $149.

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How Can I Save More With New Jerseys 529 Plan

NJBEST’s beneficiaries who eventually enroll in a New Jersey college or university may be eligible for a scholarship worth up to $1,500, depending on the amount of above-minimum contributions their account holders make.

After a beneficiary qualifies for a $500 scholarship, the award will increase by $250 every two years up to a $1,500 maximum, which you can use to fund the students first year in the event he or she gets accepted to and enrolls in a New Jersey higher education institution.

In addition, the first $25,000 in savings wont be factored into the formula the state of New Jersey uses to determine your childs eligibility for financial aid.

The NJBEST 529 plan also facilitates the process of requesting monetary donations toward the 529 plan in the form of gifts from friends and family. With the personal crowdfunding tool Spryng, you can create an online profile for your 529 plan and share the link across social media and email. The plan also allows you to print customized requests for gifts during special occasions such as birthdays. Friends and family can send personal checks, cashiers checks and bank money orders for a minimum of $25 directly to your 529 plan account.

Free College Tuition For New Jersey Students

New Jerseys Community College Opportunity Grant currently offers residents free tuition for two years at an in-state community college.

The Garden State Guarantee provides free tuition at New Jersey public four-year colleges for third- and fourth-year students. Eligible students must have an annual household income below $65,000. Tuition discounts for higher-income students would phase out on a sliding scale. Individual colleges would determine their own income threshold.

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Franklin Templeton 529 College Savings Plan

Franklin Templeton 529 College Savings Plan is a traditional NJ 529 plan that allows you to invest money today and reap tax benefits when you withdraw it to pay for qualified education expenses.

Type: Advisor. Please contact a financial advisor in your state for assistance.

Fund Family: Franklin Templeton Advisers, Inc.

Minimums: To get started you can deposit $250, or you can set up an automatic monthly pay plan and open an account with as little as $50. Minimum subsequent contributions are $25 and less with payroll deduction or the automatic plan.

Maximum Contributions: Currently, you can contribute to your New Jersey 529 plan until the aggregate balance reaches $305,000. Of course, your total amount in the plan can be higher as your investments group. 529 plans typically increase the contribution limit over time, so you may be able to contribute more.

Tax Benefits: In and out-of-state participants get the federal tax benefits.

Other Benefits: Students at New Jersey colleges can receive a tax-free scholarship with value that increases along with time and investments in the plan. Also, the first $25,000 in savings will be excluded from the criteria used to determine eligibility for financial aid awarded by the state.

Residency: Franklin Templeton 529 College Savings Plan is open to all United States residents, not just those in New Jersey.

You can learn more about this New Jersey 529 plan at the official website.

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New Jersey Deductions For Higher Education Expenses And Savings

Reforming New Jersey

Posted On:Posted In:James B. Evans, Jr., J.D., LL.M., CPA

Beginning in 2022, the New Jersey College Affordability Act allows New Jersey taxpayers tax deductions for certain educational expenses. The deductions are targeted for taxpayers with gross income of $200,000 or less. Deductions are allowed for contributions to the NJBEST college savings plan, in-state higher education tuition costs and NJCLASS loan repayments.

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Nj College Affordability Act: What You Need To Know

Category:College Savings Planning

College may become more affordable for some individuals in New Jersey, now that Gov. Murphy signed the New Jersey College Affordability Act into law. Heres how it works.

To qualify, taxpayers must open and contribute to a New Jersey Better Educational Savings Trust account, New Jerseys 529 college savings plan.

Tax Deductions For New Jersey Families

Unlike traditional IRAs and 401s, 529 plan contributions are not tax deductible at the federal level. Thanks to recent legislation, however, you may now be able to deduct up to $10,000 of annual contributions you make to New Jerseys 529 plan the New Jersey Better Educational Savings Trust from your state income taxes. This deduction is available to New Jersey taxpayers with annual gross income of $200,000 or less.

The New Jersey College Affordability Act provides other educational benefits to New Jersey families as well. For example, taxpayers with up to $75,000 in annual gross income are eligible for a one-time grant of up to $750 as a dollar-for-dollar match of the initial NJBEST account deposit. And if beneficiaries enroll in a New Jersey college or university, they can apply for a $3,000 scholarship.

In addition, up to $2,500 in principal and interest paid on student loans under NJCLASS can be deducted on state income tax returns for taxpayers with up to $200,000 in annual gross income. And up to $10,000 in tuition costs can be deducted on state income tax returns if a student attends a New Jersey college or university.

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New Jersey Saving For College Report In 2022

We discuss the tax benefits, trends, do’s and don’ts and various plan options of setting up a 529 college savings plan in New Jersey

As parents, grandparents and students we know college is coming and that we’re somehow going to have to pay for it someday. Fortunately we have many options available to us including savings bonds, the stock market and 529 plans. Starting a 529 account now is always the best option, no matter how old you is. While playing the stock market may yield higher returns on your investment, placing your money into a 529 plan allows it to grow in a tax free environment. One study even found that when the federal tax benefits were taken into consideration, 529 plans outperformed their benchmarks in every category.

New Jersey has it’s own state-operated 529 plan called NJ BEST College Savings Plan. It is important to note that your child does not have to go to a NJ college or university in order to use this savings account. 529 plan funds can be used at any accredited college or university across the nation, including some K-12 private schools!

Tax Deduction For Student Loan Payments

Picking the Right 529 Plan | Forbes

Families who earn up to $200,000 may also deduct up to $2,500 in student loan repayments from New Jersey taxable income. Qualifying repayments include payments of interest and principal toward New Jersey College Loans to Assist State Students .

NJCLASS student loans are available to New Jersey residents and students and include in-school, refinance, and consolidation options.

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Qualified Elementary And Secondary Education Expenses

These are expenses for no more than $10,000 of tuition, incurred by a designated beneficiary, in connection with enrollment or attendance at an eligible elementary or secondary school.

*CAUTION Illinois Qualified Expenses do not include expenses for:

  • tuition in connection with the Beneficiarys enrollment or attendance at an elementary or secondary public, private, or religious school. The amount of cash distributions for such expenses from all 529 qualified tuition programs with respect to a Beneficiary shall, in the aggregate, not exceed $10,000 during the taxable year.
  • If a withdrawal is made for such purposes it may be a Federal Qualified Withdrawal and not be included in income for federal and Illinois purposes, but if an Illinois income tax deduction was previously claimed for Contributions to the Account all or part of that deduction may be added back to income for Illinois income tax purposes.

Please consult with your tax advisor.

Law Allows For Up To $22500 In Tax Deductions For College Students

By: Nikita Biryukov– February 25, 2022 6:29 am

Assembly Speaker Craig Coughlin speaking at The College of New Jerseys Ewing campus on Feb. 24, 2022.

A trio of tax breaks for college students and their families went into effect with the start of the new year.

The programs, enacted under a bill signed into law last year, allow New Jerseyans with annual household incomes of $200,000 or less to deduct up to $22,500 from their state income tax bills.

Theres been lots of talk about making New Jersey more affordable and grappling with what that means and being relevant for families in New Jersey moving forward, Assembly Speaker Craig Coughlin , who sponsored the bill, said Thursday. Im glad that were continuing to take steps to address what has been one of the biggest barriers perhaps the biggest barrier to students obtaining a degree, and thats cost.

Nearly 13% of New Jersey residents owe debt on federal student loans, with an average outstanding balance of $35,600, according to the U.S. Department of Education. That figure does not include debt from private loans or ones offered through the state.

The first deduction allows eligible New Jerseyans to deduct up to $10,000 in in-state tuition payments. Tuition payments made using private and public student loans do not qualify for the deduction.

Residents can also deduct up to $2,500 in payments to student loans offered through the New Jersey College Loans to Assist State Students program.

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