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The Missouri legislature has approved a bill that provides Missouri taxpayers using non-Missouri state qualified tuition plans (“529 plans”) with the same state tax breaks enjoyed by those taxpayer’s using Missouri’s own 529 plan.

Under prior law, a Missouri taxpayer was entitled to a deduction for funds contributed to a 529 plan only if that taxpayer chose to use Missouri’s 529 plan. Under the new law, a Missouri taxpayer can get a state income tax deduction of up to $8,000 ($16,000 for joint filers) for funds contributed to any 529 plan across the country. Missouri joins Arizona, Kansas, Maine and Pennsylvania in making tax benefits for 529 plan contributions available to its residents regardless of whether or not they use an in-state or out-of-state plan. By providing the same state tax deductions for all 529 plans, the new law should allow Missouri families to select the right plan for their individual needs without having to include state tax benefits in the equation when selecting a 529 plan.

The new law also provides joint filers with a maximum $16,000 annual state tax deduction regardless of which spouse is making the contribution. Previously, both spouses had to contribute $8,000 in a year to receive the maximum deduction.

Finally, the new law removes 529 assets and distributions from Missouri financial aid formulas.

The Missouri tax deduction for contributions to out-of-state 529 plans is effective for tax years beginning in 2008.

For more information, contact:

Steven J. Brown, CPA
Partner-in-Charge
Tax Consulting Services Group
314.290.3326
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Richard C. Petrofsky, J.D., LL.M.
Partner
Tax Consulting Services Group
314.290.3487
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