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 at eligible educational instituions.*

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 $18,000 per year ($36,000 if married filing jointly) without triggering federal gift taxes. Or you can choose a special election that allows you to treat a single $90,000 contribution ($180,000 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

Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other benefits that are only available for investments in that state’s 529 plan. Other state benefits may include financial aid, scholarship funds, and protection from creditors. 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 New York State tax deductions previously taken.

Rollovers from 529 plans to ABLE plans

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.

*Earnings on nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. New York State tax deductions may be subject to recapture in certain additional circumstances such as rollovers to another state's 529 plan, withdrawals used to pay elementary or secondary school tuition, rollovers to a beneficiary's Roth IRA account, or qualified education loan repayments as described in the Disclosure Booklet and Tuition Savings Agreement. State tax benefits for non-resident New York taxpayers may vary. Tax and other benefits are contingent on meeting other requirements. Please consult your tax advisor about your particular situation.

**Contributions of up to $10,000 are deductible annually from New York State taxable income for married couples filing jointly; single taxpayers can deduct up to $5,000 annually. New York State tax deductions may be subject to recapture in certain circumstances such as rollovers to another state's 529 plan, nonqualified withdrawals, withdrawals used to pay elementary or secondary school tuition, rollovers to a beneficiary's Roth IRA account, or qualified education loan repayments as described in the Disclosure Booklet and Tuition Savings Agreement. State tax benefits for non-resident New York taxpayers may vary. Please consult your tax advisor about your particular situation.