With the signing of House Bill 145, Delawareans who make contributions to DE529 Education Savings Plan accounts, or DEPENDABLE accounts, will be eligible for a deduction from their federal adjusted gross income (AGI) when filing their income taxes.
“Creating pathways to economic empowerment remains one of my top priorities for our office,” said State Treasurer Colleen Davis.” There’s no better way to create that safeguard than by saving, be it for education or the future needs of a person with a disability.”
The new law creates a tax deduction for any amounts up to $5,000 ($10,000 for couples filing a joint return) contributed to a DEPENDABLE account, and a similar deduction of up to $1,000 ($2,000 for joint returns) into the DE529 Education Savings Plan.
“DEPENDABLE is Delaware’s own ABLE (Achieving a Better Life Experience) program that allows individuals with disabilities and their families to save for a broad range of expenses on a tax-advantaged basis without jeopardizing their state or federal benefits,” Davis said. “There’s no limit to what people with disabilities can do so there’s no reason to limit their savings. This new tax deduction will help them save even more.”
The deduction will take effect for contributions made after December 31, 2021, by the account owner or anyone else.
A new deduction will also become available for contributions to DE529 Education Savings Plan accounts in some cases. Federal adjusted gross income will be reduced for any contribution up to $1,000 (or $2,000 for joint returns) with a few conditions.
The deduction will NOT apply to:
- Tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school
- Individuals with a federal AGI greater than $100,000 (or $200,000 for joint returns).
Deductions for couples with an AGI below $200,000 are capped at $2,000.
The deduction for contributions to DE529 Education Savings Plan accounts takes effect on January 1st of the calendar year following notification from the Delaware Secretary of Finance to the Register of Regulations of the availability of the funds.
“A college degree should come with pride, joy, and hope for the future, not fear and worry over future student loan payments,” Davis said. “Incentivizing Delawareans with this additional tax benefit will hopefully increase their saving and reduce future debt.”
The Delaware Plans Management Board administers both DEPENDABLE and the DE529 Education Savings Plan. Board Chair Donna Vieira, executive vice president and chief commercial officer for Sallie Mae, sees the deductions as another valuable tool.
“A primary goal of the Plans Management Board is making saving a priority for Delawareans,” Vieira said. “I commend Treasurer Davis and members of the General Assembly for showing their commitment to the financial wellness of families up and down our state.”
“If a parent contributes just $1,000 a year to a 529 account beginning the year the child is born, the account could grow to $44,000 by the time the child turns 18,” said Rep. Krista Griffith, prime sponsor of the legislation. “Thanks to HB 145, more working families will be able to provide their kids with a nest egg for their education. It will also go a long way in supporting those in the disability community by allowing up to $5,000 in tax deductions for ABLE accounts.”
“Putting aside money for the future can be an incredibly difficult proposition for many working families,” said Sen. Trey Paradee, the Senate prime sponsor of HB 145. “Parents saving for college or putting money away to secure a stable future for their child with disabilities deserve our support. I want to thank Treasurer Colleen Davis for all of her hard work on getting this bill passed and a big thank you to Governor John Carney for signing this important legislation into law.”