Where to Claim the 529 Maryland Tax Deduction on Your Tax Return

Saving for education can be more affordable with a Maryland 529 plan, which offers state tax benefits to eligible contributors. One key advantage is the ability to deduct contributions from Maryland state income taxes, potentially lowering your overall tax burden. However, knowing where and how to claim this deduction on your tax return is essential.

Eligibility Requirements

Maryland residents who contribute to a Maryland 529 plan may qualify for a state income tax deduction, but only account holders—those who establish and maintain ownership of a Maryland 529 account—can claim it. If a grandparent, friend, or other third party contributes to an account they do not own, they will not receive a tax benefit.

The deduction is only available to Maryland taxpayers who file a state income tax return. Nonresidents, even if they contribute to a Maryland 529 plan, cannot claim the deduction. Additionally, only contributions to the Maryland Prepaid College Trust or the Maryland College Investment Plan qualify. Contributions to 529 plans from other states do not receive Maryland’s tax deduction.

Eligible Contributions

Only cash contributions—via checks, electronic transfers, or payroll deductions—qualify for Maryland’s state income tax deduction. Gifts of stocks, bonds, or other securities are not eligible.

Contributions must be made within the tax year for which the deduction is claimed. A contribution made in January 2025 cannot be deducted on a 2024 Maryland state tax return.

For joint filers, each spouse can claim deductions for their own contributions. If only one spouse contributes, the deduction is limited to that individual’s contribution. Couples looking to maximize their deduction should consider splitting contributions.

Deduction Caps

Maryland limits the deductible amount of 529 contributions each year. The maximum deduction is $2,500 per beneficiary per account holder. Taxpayers with multiple beneficiaries can claim separate deductions for each one. A parent contributing to accounts for two children could deduct up to $5,000 if they contribute at least $2,500 to each child’s account.

Contributions exceeding the annual deduction limit can be carried forward to future tax years. If a taxpayer contributes $5,000 to a single beneficiary’s account in 2024, they can deduct $2,500 on their 2024 Maryland tax return and carry the remaining $2,500 forward to deduct in 2025.

Filing Procedures

To claim the Maryland 529 tax deduction, contributions must be reported on Form 502, Maryland’s resident income tax return. The deduction is entered on line 13, which covers allowable subtractions from federal adjusted gross income. Taxpayers must also complete and attach Maryland Form 502SU, which details the nature and amount of subtractions, including 529 plan contributions. Without this form, the deduction may be disallowed.

Taxpayers should retain year-end account statements from the 529 plan provider, which reflect total contributions made during the tax year. If contributions were made through payroll deductions, final pay stubs or employer-provided documentation showing 529 plan deposits should also be kept.

Carryforward Provisions

Maryland allows taxpayers to carry forward excess 529 contributions that exceed the annual deduction limit.

Taxpayers must track their original contribution amount, the portion deducted in the current year, and the remaining balance eligible for future deductions. Each year, the unused portion can be deducted up to the $2,500 per beneficiary limit until the full contribution has been used. There is no expiration on the carryforward period. However, failing to keep accurate records could result in missed deductions or errors on future tax returns.

Documentation

Maryland does not require taxpayers to submit proof of contributions when filing, but they must be able to verify contributions if audited.

Year-end account statements from the Maryland 529 plan provider serve as the primary proof of contributions. These statements should reflect the total amount deposited during the tax year and match the deduction claimed on the tax return. If contributions were made through payroll deductions, additional documentation, such as final pay stubs or employer-provided reports, should also be retained.

For taxpayers carrying forward excess contributions, maintaining a log of prior-year deductions and remaining balances is essential to ensure the full benefit is claimed over time.