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    • South Carolina 529 Plan Deduction

     Posted on December 13th, 2011

    A few key things you need to know about South Carolina’s 529 plan:
    • “unlimited” state income tax deduction.  In other words, a South Carolina taxpayer can deduct any amount they contribute to a SC 529 plan, as long as they have income to deduct.  Residents can claim it even if they do not itemize their other deductions (opting for the standard deduction).
    • no income phaseout on the SC 529 Plan tax deduction.
    • April 15 contribution deadline for the previous year. Most states’ plans require contributions to be made by December 31st to qualify for the deduction.
    • out-of-state plans or other types of college savings accounts do not apply.  South Carolina residents trying to decide whether to use a SC 529 plan versus another state’s Section 529 plan need to account for the potential tax savings of contributing to their in-state plan.

    The plans are meant to encourage long-term savings for college, but South Carolina’s tax treatment of contributions makes them attractive for near-term college expenses as well.  It is also a great planning tool even if your child is already in college.  You can put $5,000 into the plan on, say, December 31, 2011 and save $350 on SC state taxes ($5,000 x 7% state tax rate).  Then you can turn around take that $5,000 out on January 1, 2012 to pay for tuition or room and board expenses for the current semester.  The school does not have to be in South Carolina.

    Have more questions about South Carolina 529 plans?  Contact us!
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