Taxes – What You Need to Know
If you are a New Mexico resident (or reside in a state that allows a tax benefit for contributions to an out-of-state 529 plan), remember to claim the tax benefit for your contributions on your state income tax return each year. This is an important benefit of your 529 plan with The Education Plan and can generate significant savings.*
When used for qualified educational expenses, earnings on your 529 account and withdrawals from it are not subject to federal taxes.
Getting More Out of Your Tax Refund
If you receive an annual tax refund, it can be tempting to spend on a single large, indulgent purpose. We get it! Instead, consider reinvesting your refund in your 529 account so it continues to grow and work for you. This is a simple way to grow your account every year.
*New Mexico does not permit state tax deductions for contributions used to pay for K-12 tuition payments and transfers to an ABLE account. It likely will not allow deductions for contributions used to pay for student loan repayments and apprenticeship programs. The amounts deducted for these purposes may be recaptured as state taxable income in subsequent years. If you are a taxpayer in a state that permits state tax benefits for contributions to an out-of-state 529 plan you should consult a tax advisor or otherwise determine if your state imposes any limitations on the use of 529 contributions.