Benefits For Indiana State Taxpayers

Take advantage of Indiana tax advantages based on contributions to CollegeChoice CD! Also, Hoosiers enjoy a high maximum contribution limit of $450,000 per beneficiary. If you are an Indiana taxpayer (resident or non-resident), you are eligible for a State income tax credit for contributions to an account in CollegeChoice CD.¹ The tax credit is available to an individual filing a single return or a married couple filing a joint return. The amount of the credit is the lesser of the following:

• Twenty percent (20%) of the amount of the total contributions to CollegeChoice CD during the taxable year by the taxpayer;
• Up to $1,500 ($750 for married filing separately);¹ or
• The amount of the taxpayer’s adjusted gross income tax liability for the taxable year reduced by the sum of all other credits allowed.

On December 20, 2019, the SECURE Act was signed into law. The SECURE Act amended Section 529 to permit withdrawals to pay for expenses for apprenticeship programs registered and certified with the Secretary of Labor under the National Apprenticeship Act (Apprenticeship Program Expenses) and to pay principal and interest on certain qualified education loans (Education Loan Repayments) for a beneficiary or any of the beneficiary’s siblings. The loan repayment provisions apply to repayments up to a lifetime maximum of $10,000 per individual. The effective date of the SECURE Act is January 1, 2019.

In March 2020, Indiana Code Section 6-3-3-12 was amended (Amendment) to:

• exclude Education Loan Repayments from Indiana Qualified Higher Education Expenses; and
• revise the definition of an Indiana taxpayer to include married individuals filing separately. The maximum annual credit allowed for a married taxpayer filing separately is $500.

These changes are effective January 1, 2020. This means that, for the tax year beginning January 1, 2019, a distribution to make an Education Loan Repayment will not be subject to recapture of the Indiana state income tax credit but, beginning January 1, 2020, a distribution to make an Education Loan Repayment will be subject to recapture of the Indiana state income tax credit. In addition, any earnings distributed will be included in your Indiana adjusted gross income for the applicable tax year.

The Amendment did not address Apprenticeship Program Expenses. Distributions used to pay those expense are considered tax free distributions for both federal and Indiana tax purposes.

As with any change to law, we encourage account owners to consult a qualified tax advisor regarding the application of federal and state tax laws to their particular situation. Please see the CollegeChoice CD Disclosure Statement for detailed information.

If you have questions about the CollegeChoice CD 529 Savings Plan, you can reach our Customer Service team by phone at 888-913-2885, Monday through Friday from 9 a.m. to 6 p.m., Eastern Time.  

Remember: You do not need to be the Account Owner to take the Indiana state income tax credit. In order to take advantage of this year's Indiana state income tax credit,* your contribution or deposit must be received by December 31. We will generally treat contributions sent by U.S. mail as having been made in a given year if checks are postmarked on or before December 31 of the applicable year, and provided the checks are subsequently paid. For electronic contributions, we will generally treat contributions received by us in a given year as having been made in that year if you initiate them on or before 11:59 p.m. Eastern Time on December 31 of that year and the funds are successfully deducted from your checking or savings account at another financial institution.Electronic bank transfers are the quickest and most efficient way to make a contribution. You may take advantage of the electronic bank transfer option through our Online Banking feature.

*If you are an Indiana taxpayer (resident or non-resident, individual or married), you may receive a 20% State tax credit against your adjusted gross income, up to a maximum of $1,500, for contributions to a CollegeChoice CD Account. Rollover contributions from another Qualified Tuition Program into a CollegeChoice CD Account do not count as contributions eligible for the tax credit. This credit may be subject to recapture from the account owner (not the contributor) in certain circumstances, such as rollovers to another state’s 529 plan, federal nonqualified withdrawals, withdrawals used to pay elementary or secondary school tuition for a school outside of Indiana, or qualified education loan repayments as described in the Disclosure Booklet.

Federal 529 Plan Tax Benefits for All U.S. Residents

• Earnings grow tax-deferred.²
• Distributions to pay qualified education expenses are tax-free.
• Any U.S. Citizen or Resident Alien can participate and there are no income limitations.
• Participants also benefit through tax-free gifting. Contributors can make annual gifts of up to $18,000 ($36,000 for married couples making the proper election) to a beneficiary for all accounts without incurring federal gift tax. For contributions over the limit, you may treat the money (up to $90,000 single and $180,000 for married couples making the proper election) as having been made over a five-year period.³
• U.S. Savings Bond owners generally may redeem bonds purchased after 1989 tax-free and contribute the proceeds in a 529 plan. IRS restrictions apply. Please see the IRS Tax Benefits for Education for current income limitations or call 888-913-2885 for more information.
• If the beneficiary does not attend a post-secondary institution, the account owner can change the beneficiary, penalty free. To avoid taxes and penalties, the new beneficiary must be a member of the family of the original beneficiary. Certain restrictions apply. Please consult your tax advisor and the Disclosure Statement for more detailed information regarding a change in beneficiary.

1. This credit may be subject to recapture from the account owner (not the contributor) in certain circumstances, such as a rollover to another state’s qualified tuition program or a non-qualified withdrawal. The credit does not apply to rollovers from another state’s qualified tuition program. See the Disclosure Statement for additional details.
2. Earnings on nonqualified withdrawals are subject to federal income tax and may be subject to a 10% federal penalty tax, as well as state and local income taxes and early withdrawal penalties. The availability of tax or other benefits may be contingent on meeting other requirements.
3. In the event the contributor does not survive the five-year period, a pro-rated amount will revert back to the contributor’s taxable estate.

NexBank and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.