TRENTON – Legislation sponsored by Senators Barbara Buono and Shirley Turner to provide residents who save for their children’s college education through a state-administered college savings plan with a state income tax deduction for their investments was unanimously approved by the Senate Higher Education Committee yesterday.
“We must better help parents to save for their children’s college education,” said Buono (D-Middlesex). “As the burden of education loans continues to skyrocket, many students may find it impossible to afford college without substantial family savings. By making NJ BEST contributions tax free, we will enable more families to put aside money for their children’s future.”
Under the bill (S-1857) couples filing a joint tax return would be able to deduct the first $10,000 contributed annually to the New Jersey Better Educational Savings Trust (NJ BEST) program; single filers would be able to deduct up to $5,000. NJ BEST is a 529 college savings plan administered by the New Jersey Higher Education Student Assistance Authority and managed by Franklin Templeton Investments.
Under federal tax law, earnings realized through a 529 account used for qualified higher education expenses are never taxed.
“Working families throughout New Jersey are scrimping to save for their children’s future by putting money aside for college education costs, yet current law requires this money to be taxed,” said Turner (D-Mercer, Hunterdon). “These families should be rewarded for their efforts and we can do so by making this common sense change. This meaningful tax break could be the catalyst to encourage even more families to open a college savings account.”
The bill now heads to the Senate Budget and Appropriations Committee for further review.
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