Increases tax free contributions to family tuition accounts

BILL NUMBER:S7197 REVISED 5/7/14

Title of bill

An act to amend the tax law, in relation to contributions to family tuition accounts

Purpose

To increase the amount that a family can deduct from their income taxes for contributions to the college choice tuition savings accounts.

Summary of provisions

Section 1. Amends paragraph 32 of subsection (c) of section 612 of the tax law to double the exclusion a single payer can claim for contributions to a family tuition account from five to ten thousand dollars for a single filer, and from ten to twenty thousand dollars for married filers filing jointly.

Section 2. Effective date.

Justification

In the late 90's New York created the New York State College Choice Tuition Savings Program, also known as the 529 College Savings Program. Families can set up 529 accounts for their children and contributions into these accounts can be later used to pay for any qualifying educational expenses, be it tuition, fees, textbooks, and certain room and board costs. New York's 529 College Savings Program has proven quite popular. According to market reports New York's College Savings Program is the second largest in the country, with over 764,000 account open totaling over $14.23 billion in funds invested in the program.

The amounts that individuals can deduct from their taxes for contributions to these accounts has not changed since the early 2000's. As the College Board report shows, the increase in the costs of tuition plus additional expenses has been significant. The average total costs at four-year private nonprofit institutions have increased by 25% from the 2002-03 academic year to the 2012-13 academic year and at public four-year institutions the increase has been an incredible 45% in the same time. The amount individuals can contribute to these accounts tax free needs to keep up with the massive inflation in college costs that we have seen in the last decade.

Legislative history

New bill.

Fiscal implications

This legislation would double the amount that filers can deduct from their income taxes for contributions to family tuition accounts. Currently, this tax expenditure is estimated to cost the state $55 million. It is estimated that enactment of this legislation would result in an additional cost to the state of $20 million.

Effective date

This act shall take effect immediately, and shall apply to the taxable year in which it takes effect and taxable years commencing on or after such date.