Important Maine tax update affecting Section 529 plans, including NextGen 529

Published November 27, 2018

In December 2017, Congress passed legislation that made changes affecting Section 529 accounts, including NextGen 529:

  • Assets can be withdrawn (without federal tax consequences) for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.
    • This applies to distributions after December 31, 2017.
    • These distributions are limited to $10,000 in a tax year, across all 529 accounts for the same beneficiary.
  • Assets can be rolled over to a Section 529A (ABLE) account without federal tax consequences beginning December 23, 2017. An ABLE rollover is counted towards the annual ABLE account contribution limit.

As a result of recent Maine legislation, and retroactive to the effective dates set forth above, Maine tax treatment for withdrawals for elementary or secondary school tuition or ABLE rollovers conforms to the favorable federal tax treatment. Other states’ tax laws may differ. Please consult your tax advisor for specific advice regarding such distributions in your state.

Owners of NextGen 529 accounts which have been awarded Maine matching grants, or eligible for Maine matching grants, should continue to be aware that matching grants may only be withdrawn for payment to eligible institutions of higher education.