Tax question: Tax deduction for NY 529 plan for NJ resident working in NY? archived

If I work in NYC and live in NJ, and make a contribution to a NY 529 plan, do I get any deduction on my NJ state income taxes? I always get confused about the bi-state thing, since I believe my state taxes are withheld in NY and then are exchanged with NJ. Thanks for any thoughts.

Follow-up question: for an NJ resident is there any state tax benefit for investing in a 529 plan? Thanks!

You actually pay NY taxes since you work in NY, and you can get a deduction on that for your 529 contributions. This is why I chose a NY 529 plan, so I'd get at least some benefit.

ETA: NJ doesn't give you any benefit.

And NJ 529 is not a very good one.

Thanks. What is the actual tax benefit if I invest in the NY plan -- i.e., how worthwhile is it compared to another state's plan that I consider to be a better investment option but would receive no state tax benefit from? Thanks!

Up to 10K deduction off your gross on a married filing joint return.

you get some minor benefit from the deduction on your NY state taxes... but it reduces the deduction that you can take on your NJ taxes for paying NY taxes.... so the net gain is pretty small.

Basically all your income is taxed by either NY or NJ if you take a deduction on your income in NY then it is just taxed at the NJ rate.

So should I put $10K in the NY plan or no? I wonder what the actual cash benefit is. Yes I know I should ask a CPA but I currently don't have one and used TurboTax last year.

If you're going to contribute to a 529 regardless, the NY plan is at least as good as any other state. The NJ plan is...not great.

Since the federal tax is significantly higher than the state tax, you will get benefit no matter what 529 you invest in. Best to look for good investment results (i.e. probably not the NJ plan) and, if you work in NY, then that also adds to the appeal of the NY plan which is generally considered fairly good. But there are NJ folks who invest in other states' plans as well.

yes you should put it in the NY plan... you will probably save a couple of hundred dollars in taxes and the options in the NY plan are good.

We're about to open the NY 529. I'll admit, my dad, who's way into investing, did the research for me. But he assured me it's one of the best option out there. And the tax benefit is nice too...

if you opt for the NY 529 plan, one benefit to look into is the U-promise credit card - currently offered through Barclays. We have two accounts. One in my name for the benefit of our daughter, the other in my wife's name for the benefit of our son. In the 13 years that we've been contributing to the plan and using our U-promise cards, U-promise has kicked in in excess of $5K. Not a lot but maybe books for a couple of years.

SGW said:

if you opt for the NY 529 plan, one benefit to look into is the U-promise credit card - currently offered through Barclays. We have two accounts. One in my name for the benefit of our daughter, the other in my wife's name for the benefit of our son. In the 13 years that we've been contributing to the plan and using our U-promise cards, U-promise has kicked in in excess of $5K. Not a lot but maybe books for a couple of years.

You can actually take advantage of U-promise even without a credit card by registering credit cards or using their website to access other sites for shopping. It adds a few bucks here and there every month and we just started a year + ago.

Franklin Templeton cuts its fees in half and put in new management, and the latest rankings have the NJ plan at the top for returns: http://www.savingforcollege.com/articles/2014-plan-performance-rankings-q2-330

Still no deduction for NJ state taxes, but it appears not to be the dog it once was.