Yes, 529 contributions are tax deductible in Maryland, though the state technically calls it a subtraction rather than a deduction. You can subtract up to $2,500 per beneficiary each year from your Maryland adjusted gross income for money you put into a Maryland College Investment Plan or Maryland Prepaid College Trust account.1Maryland 529. Tax Advantages Because it reduces taxable income rather than tax owed, the real savings depend on your bracket. A contributor in a combined 7% state and local bracket who claims the full $2,500 saves roughly $175 per beneficiary.
Only contributions to the two Maryland-sponsored plans qualify. Out-of-state 529 accounts do not.
How Much You Can Subtract Each Year
The cap is $2,500 per beneficiary, per contributor, per tax year. Contribute to accounts for three children and you can subtract up to $7,500 in total, $2,500 for each child.1Maryland 529. Tax Advantages
Married couples are treated as two separate contributors. If both spouses put money into the same child’s account, each can claim up to $2,500, for a combined $5,000 subtraction on that one beneficiary.2Maryland General Assembly. Fiscal and Policy Note for House Bill 1106 This holds whether you file jointly or separately.
Maryland 529 also caps total balances at $500,000 per beneficiary across all Maryland 529 accounts combined. Once you hit that ceiling, the plan stops accepting new contributions, though existing balances keep growing through investment earnings.3Maryland 529. Help Center
What Happens If You Contribute More Than $2,500
Extra contributions do not lose their tax benefit. Maryland lets you carry the excess forward and keep subtracting $2,500 per year until the full contribution has been claimed.
The carry-forward window depends on which plan holds the money. For the College Investment Plan, unused amounts carry forward for up to 10 additional tax years.1Maryland 529. Tax Advantages For the Prepaid College Trust, the carry-forward continues until the full amount has been subtracted, with no stated time limit.2Maryland General Assembly. Fiscal and Policy Note for House Bill 1106
A worked example: contribute $27,500 to the College Investment Plan for one child in a single year, and you can subtract $2,500 annually across 11 years (the contribution year plus 10 carry-forward years) to use the full amount.1Maryland 529. Tax Advantages You are responsible for tracking the remaining balance each year and reporting it on your return.
Who Can Claim the Subtraction
You qualify if you file a Maryland income tax return and personally made a verifiable contribution to a Maryland 529 account. Account ownership is not required. Grandparents, aunts, uncles, and family friends who contribute directly can each claim the subtraction on their own Maryland returns.4Comptroller of Maryland. Maryland 529 Contribution Subtraction Rules and Limits
One exception: if you received funds under the Maryland State Contribution Program during the tax year, you cannot claim the subtraction for College Investment Plan contributions for that same year. The State Contribution Program provides matching funds for lower-income families, and the deduction benefit is suspended while you participate.5Maryland General Assembly. Fiscal and Policy Note for House Bill 1300
How to Claim It on Your Maryland Return
The subtraction is reported on Maryland Form 502SU, Subtractions from Income, which you attach to Form 502.6Comptroller of Maryland. Maryland Form 502SU – Subtractions From Income You will need:
- Your 529 account number.
- The full legal name and Social Security number of each beneficiary.
- The exact amount contributed between January 1 and December 31 of the tax year.
On Form 502SU, enter the code for the Maryland College Investment Plan or the Maryland Prepaid College Trust in the designated section. If you are claiming subtractions for more than one beneficiary, list each one separately. The total flows to your Form 502.
If you use the Comptroller’s iFile system, the software walks you through the schedule. Paper returns go by mail to the Comptroller’s office. Keep contribution receipts and copies of your forms in case Maryland asks for verification.
Non-Qualified Withdrawals and Recapture
The subtraction is not permanent if the money never reaches an eligible educational use. If you take a non-qualified withdrawal, Maryland requires you to add back any amounts you previously subtracted. This state recapture is separate from any federal tax and penalty owed on the earnings portion.4Comptroller of Maryland. Maryland 529 Contribution Subtraction Rules and Limits
The addition to income is capped at the total subtractions you have already claimed. So if you subtracted $10,000 across four years and then took a non-qualified withdrawal, you would add back up to $10,000 on your Maryland return for the year of the distribution.4Comptroller of Maryland. Maryland 529 Contribution Subtraction Rules and Limits The earnings portion is already in your federal adjusted gross income, so no additional Maryland adjustment applies to that piece.
What Counts as a Qualified Expense
Qualified expenses at the federal level include tuition, fees, books, supplies, equipment, room and board at eligible postsecondary institutions, and computer technology used by the student while enrolled. Eligible institutions include colleges, universities, and vocational schools that participate in federal student aid programs.7Internal Revenue Service. 529 Plans: Questions and Answers
K-12 tuition also qualifies, up to $10,000 per year for elementary or secondary school at a public, private, or religious institution.7Internal Revenue Service. 529 Plans: Questions and Answers Maryland treats these distributions as qualified, and the state subtraction for contributions applies whether you intend to spend the money on K-12 or college.8Maryland Department of Transportation. Save for K-12 Education With a Maryland College Investment Plan