Let’s talk tax benefits.
It can be advantageous having a NEST 529 account.
NEST tax advantages give your money the opportunity to grow.
Watch your earnings build.
Your NEST contributions are made with after-tax dollars and earnings grow federally and state tax-deferred while invested. So you don’t have to pay taxes on the money you’re earning while it’s in the Plan. Any investment growth is yours to use for college expenses.
When it’s time to use those funds for school, withdrawals can be tax-free if the funds are used for qualified college expenses like tuition, books, and equipment.1
- There is a $500,000 contribution limit for each beneficiary.
- Nebraska account owners receive significant tax advantages for investing in NEST, including up to an annual $10,000 state income tax deduction.2
- Account owners can receive 529 plan tax advantages regardless of where they live.
Tax benefits for each state
In some states, contributions to any state’s 529 plan are eligible for a state income tax advantage. Out-of-state investors are not required to choose their home state plan to get the benefit but can select any state’s 529 plan, including the low-cost NEST 529.
NEBRASKA – with the NEST Direct College Savings Plan taxpayers can deduct up to $10,000 in contributions from their Nebraska taxable income each year ($5,000 if married filing separately).2
Before investing, investors should consider whether their or their beneficiary’s home state offers any state tax or other state benefits such as scholarship funds, financial aid, and protection from creditors that are only available for investments in such state’s qualified tuition program. Investors should also consult their tax advisor, attorney, or other advisor regarding their specific legal, investment, or tax situation.
Tax-Parity States include: Arizona, Montana, Minnesota, Kansas City, Missouri, Pennsylvania, and Florida
States that offer tax benefits for contributions to any state’s 529 plan.
Tax-Neutral States include: Alaska, California, Nevada, Washington, Wyoming, South Dakota, Texas, Hawaii, Tennessee, Kentucky, North Carolina, Delaware, New Jersey, New Hampshire, Maine
States without state income taxes or other state benefits for investing in that state’s 529 plan.
Tax-Benefit States include: Orlando, Idaho, Utah, Colorado, New Mexico, North Dakota, Nebraska, Oklahoma, Iowa, Wisconsin, Illinois, Arkansas, Louisiana, Mississippi, Alabama, Georgia, South Carolina, Virginia, West Virginia, Ohio, Indiana, Michigan, New York, Vermont, Massachusetts, Rhode Island, Connecticut, Maryland, D.C.
States where income tax benefits are only available for those who pay income tax in that state and own, or contribute to, that state’s 529 plan.
Tax Benefits for Nebraskans
Account owners are eligible to receive a Nebraska state income tax deduction of up to $10,000 ($5,000 if married, filing separately) for contributions made to their own NEST accounts.2 Contributions made beyond the $10,000 mark cannot be carried over to a future year.2
For minor-owned or UGMA/UTMA NEST accounts, the minor is considered the account owner for Nebraska state income tax deductions. The minor must file a Nebraska tax return for the year their contributions are made to be eligible for a tax deduction for their contributions. In the case of a UGMA/UTMA NEST account, contributions from the parent/guardian listed as the Custodian on the UGMA/UTMA NEST account are also eligible for a Nebraska state tax deduction.
Both the contribution and earnings portion of funds that were deposited (rolled) into a NEST account from a non-Nebraska 529 plan are eligible for the tax deduction.
Estate Planning Features
Gift contributions to a NEST 529 account are considered a completed gift from the contributor to the beneficiary for federal gift and estate tax purposes. An account owner’s contributions to an account for a beneficiary are eligible for the gift tax annual exclusion. Currently the annual exclusion is $17,000 per beneficiary ($34,000 for a married couple that elects on a federal gift tax return to “split” gifts).
You may contribute up to $85,000 in a single year to an account without the contribution being considered a taxable gift, provided that you make no other gifts to the beneficiary in the same year in which the contribution is made and in any of the succeeding four calendar years. You must make this election on your federal gift tax return by filing IRS Form 709.3
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