Direct Plan tax benefits
Our plan allows you to save on taxes while you save for higher education.
Pay no income tax on earnings
The money in your Direct Plan account grows deferred from federal and state income taxes.
Make tax-free withdrawals
You won't have to pay federal or state income taxes on the money you withdraw to pay for qualified higher education expenses.*
Get a state income tax deduction
If you're a New York State taxpayer and an account owner, you may be able to deduct up to $5,000 ($10,000 if you're married filing jointly) of your Direct Plan contributions when you file your state income taxes. Please consult your tax advisor. **
You must make a contribution before the end of a given calendar year for it to be deductible for that calendar year. If you send your contribution by U.S. mail and it's postmarked on or before December 31, we'll treat your contribution as having been made in the year in which it was sent.
To learn more about depositing your tax refund directly to your NY529 Direct Plan account, see here.
Note: There are no federal tax deductions for contributions to 529 plans.
Enjoy a federal gift tax incentive
You can contribute up to $15,000 per year ($30,000 if married filing jointly) without triggering federal gift taxes. Or you can choose a special election that allows you to treat a single $75,000 contribution ($150,000 for married couples) as if it were made over a five-year period.***
Gifts in excess of these amounts may be subject to federal gift taxes. For more information, consult a qualified tax advisor.
Points to consider
State tax benefits
If you're not a New York State taxpayer, before investing consider whether your or your beneficiary's home state offers a 529 plan that provides its taxpayers with favorable state tax or other benefits that may only be available through investment in the home state's 529 plan, and which aren't available through investment in the Direct Plan. Please consult your tax advisor.
Rollovers are subject to New York State tax on earnings
A rollover of assets from your Direct Plan account to a 529 plan in another state is subject to New York State income tax on earnings, as well as the "recapture" of all previous New York State tax deductions made during the life of the account.
Rollovers from 529 plans to ABLE plans
Beginning in 2018, account owners can also roll over 529 plan assets into ABLE plan accounts, subject to the annual ABLE plan contribution limit, until December 31, 2025. Rollovers of 529 plan assets into ABLE plan accounts will not be considered taxable events for purposes of New York State taxes. For more details about the Direct Plan's tax benefits, refer to the Disclosure Booklet and Tuition Savings Agreement.