New Tax Deduction for Contributions to Savings Plans

Act now to save money when filing your 2022 tax return next year

Thanks to a new law enacted by the Delaware General Assembly, Delaware taxpayers have new opportunities to save money.

Delawareans who save for school with the DE529 Education Savings Plan may qualify for a new tax deduction on their state returns.

“While our office oversees the management of the State’s investment portfolios, we also administer the DE529 Education Savings Plan which allows people to invest in the future of their loved ones,” said State Treasurer Colleen Davis. “Implementing a new tax deduction for DE529 contributions strengthens our commitment to helping people achieve a quality education without facing the possibility of years of student loan payments.”

Delaware tax filers are now eligible to deduct up to $1,000 of contributions to DE529 Education Savings Plans each year on their Delaware tax return (or $2,000 for joint returns) with a few additional conditions.

The deduction will NOT be available for:

  • Tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school
  • Individuals with a federal adjusted gross income greater than $100,000 (or $200,000 for joint returns).

“The Department of Finance is pleased to announce that this tax benefit will be available for qualifying contributions made throughout 2022,” said Secretary of Finance Rick Geisenberger. “With the completion of a newly launched personal income tax module of the State’s Integrated Revenue Administration System (IRAS), considerable programmatic changes were made to enable administration of this new tax benefit for qualifying 2022 tax filers.” Official notice of the “go-Live” for these technology updates was published to the December 2022 Register of Regulations, thereby allowing the tax deduction for qualifying contributions to DE529 Education Savings Plans made after December 31, 2021.

The passage of House Bill 145 earlier this year also creates a tax deduction for contributions to a DEPENDABLE account for people with disabilities. The deduction applies to any amount up to $5,000 ($10,000 for couples filing a joint return).

DEPENDABLE allows individuals with disabilities and their families save money above the $2,000 threshold that jeopardizes state and federal means-tested benefits,” said Treasurer Davis. “DEPENDABLE accounts allow people with disabilities to be able to work, able to save, and able to thrive.”

Those without a DE529 Education Savings Plan or DEPENDABLE account can take advantage of the tax deductions by opening accounts today at 529.delaware.gov or able.delaware.gov.


Celebrating National ABLE to Save Month

August marks “ABLE to Save Month,” and Delaware State Treasurer Colleen Davis wants to use the opportunity to celebrate Delawareans with disabilities and the freedom, independence, and possibilities their ABLE accounts provide.

ABLE (Achieving a Better Life Experience) plans allow individuals with disabilities and their families to save for a broad range of expenses on a tax-advantaged basis without jeopardizing their benefits from supplemental security income (SSI), Medicaid and other state and federal programs.

“Since taking office, I have focused on three main priorities: bolstering retirement security and readiness, creating pathways to economic empowerment, and promoting a culture of financial excellence,” Treasurer Davis said, “and it’s important to remember those are my priorities for all Delawareans, including those with disabilities. I’m proud that our own ABLE program, DEPENDABLE, provides a way for those with disabilities to save for the future.”

People with disabilities who receive SSI benefits may not have more than $2,000 to remain eligible for SSI and Medicaid. This limitation makes it difficult for many people with disabilities to live the independent lives they deserve and desire.

“A DEPENDABLE account offers solutions that empower our most vulnerable residents to make long-term planning decisions,” Davis said. “The ability to save creates independence by promoting the importance of financial wellness.”

As of June 30, 2022, DEPENDABLE held 242 funded accounts with assets totaling more than $2.1 million.

In addition to the existing benefits of a DEPENDABLE account, Delawareans who save with DEPENDABLE now also receive a deduction on their state income tax.

“A new law passed by the General Assembly establishes a tax deduction of up to $5,000 ($10,000 for couples filing a joint return) for contributions to DEPENDABLE accounts,” Davis said. “I thank the members of the General Assembly and Governor Carney for joining me in helping people with disabilities and those that support them.”

For more information about DEPENDABLE, visit able.delaware.gov, or visit the National Association of State Treasurers to learn more about ABLE Savings Plans.


Treasurer Davis to Help Fund New Education Accounts

Qualified accounts to receive $100 contribution

Continuing her commitment to make saving for higher education easier, Delaware State Treasurer Colleen Davis announces the “First State, First Steps” program.

“I have said time and time again that it’s never too early to save for college and ‘First State, First Steps’ will help people get started,” Davis said. “I know families with young children have competing financial priorities, so we want to help them get started.”

“First State, First Steps” is an incentive program for Delawareans. The program provides for a $100 contribution to a DE529 Education Savings Plan account opened between July 1, 2022, and December 31, 2022.

In addition to the account being opened during the applicable time period, in order to qualify for the $100 incentive:

  • The beneficiary must be five years of age or younger at the time of account opening
  • The beneficiary must be a Delaware resident at the time the account is opened
  • A minimum contribution of at least $100.00 must be made to the DE529 account when the account is opened

Delaware’s 529 Plan is sponsored by the State of Delaware and managed by Fidelity Investments. The Plan provides tax-advantaged accounts designed to help parents, grandparents and others pay for higher education expenses.

The cost of a four-year public college has increased 225% over the last 30 years, according to the College Board. Each year it becomes harder and harder for families to afford a quality education without setting themselves up for years of student loans payments.

“The student loan balance for Delawareans averages more than 37-thousand dollars,” Davis said. “Proper saving can help students graduate without facing years of loan payments allowing them to save for other financial goals including a home, car, and retirement.”

Money in a DE529 account grows on a tax deferred basis, and withdrawals for qualified education expenses like tuition, fees, and books are federal and Delaware income tax-free.

For more information on the “First State, First Steps Program,” visit 529.delaware.gov.


Two State Sponsored Savings Programs to Bring New Tax Deductions

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.”


Lawmakers Approve Treasurer’s Retirement Legislation

Delaware EARNS provides low-cost retirement savings plans

By a vote of 20 to 0 and 1 not voting, the Delaware State Senate passed House Bill 205 creating the Delaware Expanding Access for Retirement and Necessary Savings (EARNS) Program. The bill, which won House approval in May, now goes to Governor Carney for his signature.

“I am thankful that members of the General Assembly joined me in wanting to make sure every Delawarean has a reliable way to save for retirement,” Treasurer Davis said. “I’m especially grateful to Representative Lambert and Senator Poore for their sponsorship.”

Delaware EARNS is a “secure choice” program that amounts to State-facilitated, universally available retirement savings plans, providing a convenient way for all workers to save for retirement, particularly middle and low-income workers who lack access to employer-sponsored plans and small businesses that are unable to provide such a benefit.

“More than half of the State’s workforce lacks an easy way to save through a retirement program at work,” Davis said. “Not only will Delaware EARNS help those employees save for the future, it also benefits small businesses that may not be able to offer retirement plans to employees due to the cost and administrative burden, allowing them to attract and keep good employees by offering a crucial benefit like retirement savings.”

Delaware EARNS requires businesses with more than five employees that don’t currently offer a retirement plan to participate through a simple payroll process. The Office of the State Treasurer State Treasurer’s Office with the oversight of the Plans Management Board will handle all duties and functions of the plan once initial design and implementation takes place under the soon to be formed Delaware EARNS Program Board.

“The primary way for workers to save for retirement is through employer-sponsored plans, and now all employers will have a way to provide this essential benefit,” Davis said. “Delaware EARNS represents my continued commitment to bolstering retirement security and readiness, creating pathways to economic empowerment, and promoting a culture of financial excellence.”