Q. Is there a time requirement for how long money has to be in a New York state 529 college savings account to be eligible for New York state tax benefits? For instance, if a parent knows he has a tuition bill due in August for a child, can he deposit $5,000 in June and then withdraw it for the August payment to get the tax deduction? Or does it have to be in the account for, say, six months or a year before it’s withdrawn?
A. There’s no time period requirement for New York State’s 529 plan, says Nikki Jones, spokeswoman for the office of the State Comptroller. You can deposit money and take it out the next month to pay the tuition and still get the tax break that year, Jones says.
People who are single can deduct up to $5,000, and married couples can deduct up to $10,000 a year toward saving for family members’ college education costs, Jones says. You must be depositing money into a New York State 529 to take a deduction; if you are depositing money into a 529 run by a different state, you don’t qualify, Jones says. The money can be used at any college, no matter what state your plan is in.
The money isn’t deductible for federal tax purposes, Jones says.
Most states offer a 529 plan, says Young Boozer, treasurer of the state of Alabama and the chairman of the College Savings Plan Network, which provides information on 529 plans to people across the country. Anybody from any state can participate in any state’s plan. As for what other states allow their depositors to do tax-wise, “The specific answer is going to depend on whether the particular state has recapture provisions,” Boozer says. “This is a classic example of people needing to read the plan provisions.”