Are 529 Contributions Tax Deductible in Maryland?

Yes. Maryland 529 contributions are tax deductible in Maryland, though technically the state calls it a subtraction rather than a deduction. Each contributor can subtract up to $2,500 per beneficiary, per year from Maryland adjusted gross income for money put into a Maryland College Investment Plan or Maryland Prepaid College Trust account.¹ Because it reduces taxable income rather than cutting your tax bill dollar for dollar, the actual savings depend on your tax bracket.

One boundary to note up front: only contributions to Maryland’s own 529 plans qualify. Contributions to another state’s 529 program don’t earn the Maryland subtraction.

Who Can Claim the Subtraction

You qualify if you file a Maryland income tax return and either own a Maryland 529 account or contribute directly to one. Account ownership isn’t required. Grandparents, aunts, uncles, family friends, and anyone else who makes a verifiable contribution can claim the subtraction on their own Maryland return.² The two conditions that matter are that you personally made the contribution and that you file Maryland taxes.

There is one exclusion. If you received funds under the Maryland State Contribution Program during the tax year, you cannot claim the subtraction for contributions to the College Investment Plan for that same year.³ The State Contribution Program provides matching funds for lower-income families, and the subtraction is paused while you receive that match.

How Much You Can Subtract

The limit is $2,500 per beneficiary, per contributor, per tax year. If you contribute to accounts for more than one child, the cap applies separately to each.¹ A parent contributing for three children could subtract up to $7,500 in total ($2,500 × 3).

Married couples can effectively double the benefit on a single account. Each spouse counts as a separate contributor, so if both spouses contribute to the same beneficiary’s account, each can claim up to $2,500, for a combined subtraction of $5,000 per beneficiary.⁴ That holds whether you file jointly or separately.

Because this is a subtraction from income rather than a credit against tax, the real dollar value depends on your marginal state and local rate. A taxpayer in a combined 7% bracket who claims the full $2,500 for one beneficiary saves roughly $175 in Maryland tax.

Contributing More Than $2,500 in a Year

If you put in more than $2,500 for one beneficiary in a single year, the excess isn’t lost. Maryland lets you carry it forward and subtract $2,500 per year in future returns until the full amount has been claimed.

The length of that carry-forward depends on which plan you use. For the Maryland College Investment Plan, excess contributions can be carried forward for up to 10 tax years.¹ For the Prepaid College Trust, there is no stated time limit — excess amounts can be carried forward until fully used.⁴

A worked example: contribute $27,500 to the College Investment Plan for one child in a single year, and you can subtract $2,500 per year for 11 years (the contribution year plus 10 carry-forward years) to claim the whole thing.¹ You track your remaining carry-forward balance yourself and report it each year.

How to Claim It on Your Maryland Return

Report the subtraction on Maryland Form 502SU (Subtractions from Income), which attaches to Maryland Form 502.⁵ Before you sit down with the form, pull together:

Your 529 plan account number.
The full legal name and Social Security number of each beneficiary.
The exact amount you contributed between January 1 and December 31 of the tax year.

On Form 502SU, enter the appropriate code for the Maryland College Investment Plan or the Maryland Prepaid College Trust. If you are claiming subtractions for more than one beneficiary, list each separately. The total flows to your Form 502.

If you file through the Comptroller of Maryland’s iFile system, the software prompts you through these entries. For paper returns, mail the completed forms to the Comptroller’s office. Keep contribution receipts and copies of what you filed in case the state asks for verification.

If the Money Isn’t Used for School

The subtraction isn’t permanent if the funds end up spent on something other than qualified education expenses. When you take a non-qualified withdrawal, Maryland requires you to add back amounts you previously subtracted. This is a state recapture rule, separate from any federal tax or penalty on the earnings portion.²

Mechanically, Maryland treats the non-qualified withdrawal as an addition to income in the year of the distribution, capped at the total subtractions you previously claimed. Subtract $10,000 over four years, then take a non-qualified withdrawal, and you’d add back up to $10,000 on your Maryland return for that year.² The earnings portion is already captured through your federal adjusted gross income, so no separate Maryland adjustment applies to it.

Qualified uses that avoid recapture include tuition, fees, books, supplies, equipment, room and board at eligible postsecondary institutions, and computer technology used by the student while enrolled. K-12 tuition up to $10,000 per year at a public, private, or religious school also counts.⁶ Maryland follows these rules, and the subtraction applies regardless of whether you plan to use the funds for K-12 or college.⁷

1
Maryland 529. Tax Advantages
2
Comptroller of Maryland. Maryland 529 Contribution Subtraction Rules and Limits
3
Maryland General Assembly. Fiscal and Policy Note for House Bill 1300
4
Maryland General Assembly. Fiscal and Policy Note for House Bill 1106
5
Comptroller of Maryland. Maryland Form 502SU – Subtractions From Income
6
Internal Revenue Service. 529 Plans: Questions and Answers
7
Maryland Department of Transportation. Save for K-12 Education With a Maryland College Investment Plan