Can we claim a tax deduction on our Federal and Montana tax return if we invest in a Massachusetts 529 education plan for our granddaughter (set up by her parents) ?

[js59833]

529 plan has been set up by our granddaughter's parents in MA. We live in Montana and would be making a contribution to the MA 529 plan. She is not a dependent of ours.

[LisaBr · Accepted solution]

No, you cannot deduct contributions made to your grandchild's Massachusetts 529 plan since you are resident of Montana.  Also the IRS does not give a deduction for contributions to 529 plans.  However earnings in these plans grow federally tax-free.

Montana has their own 529 plan and there are other 529 plans that advertise they are deductible over a number of states.  You can check with investment advisors to see if that may be a better option for you. 

Here is some information that may be helpful regarding 529 plans:

https://www.irs.gov/newsroom/529-plans-questions-and-answers

https://achievemontana.com/

[TomD8]

According to page 21 of the 2017 Montana tax instruction booklet, instructions for Line 20:  "Contributions to another state’s 529 college savings plan may now qualify for the deduction."    https://app.mt.gov/myrevenue/Endpoint/DownloadPdf?yearId=786

[LisaBr]

Thank you TomD8.  As you are inputting the information in TurboTax for your Montana state return, you will be prompted to the area which will determine your eligibility for the credit.

[js59833]

Thanks Tom for the information.