Maryland 529 Tax Deduction 2025 – Maryland’s 529 plans remain one of the strongest education savings tools for families in 2025. The state offers a unique Maryland 529 tax deduction—technically an annual state income tax subtraction modification—that lets eligible taxpayers reduce their Maryland taxable income. This benefit applies only to contributions made to Maryland’s own 529 plans and provides immediate tax relief while your savings grow tax-deferred.
Whether you’re a parent, grandparent, or other Maryland taxpayer planning for college, understanding the 2025 rules can help you save thousands in state taxes. Below is everything you need to know, based on the latest official information from Maryland529.com and state tax resources.
What Is the Maryland 529 Tax Deduction (State Income Subtraction) in 2025?
Maryland allows taxpayers to subtract up to $2,500 per beneficiary from their Maryland adjusted gross income each calendar year for contributions to a Maryland 529 plan.
This is not a federal tax deduction—529 contributions are made with after-tax dollars federally. However, the Maryland subtraction directly lowers the amount of income subject to state tax. Earnings grow tax-deferred, and qualified withdrawals remain free from both federal and Maryland state taxes.
The subtraction applies to:
- Maryland Senator Edward J. Kasemeyer College Investment Plan (the primary savings plan)
- Maryland Prepaid College Trust accounts
Important 2025 note: Proposed legislation (SB0412) to increase the limit to $4,850 did not pass in the 2025 session. The annual subtraction limit remains $2,500 per beneficiary for tax year 2025.
Who Qualifies for the Maryland 529 Tax Benefit in 2025?
You qualify if you:
- Are a Maryland resident required to file a Maryland state income tax return
- Make contributions (as account owner or additional contributor) to a Maryland 529 plan
- Do not receive a Save4College state contribution match in the same tax year (this disqualifies the subtraction for all your Maryland 529 accounts that year)
Eligibility is not limited to parents. Grandparents, relatives, and friends who pay Maryland taxes can contribute and claim the subtraction for any beneficiary. You do not need to be the account owner.
Out-of-state residents: No Maryland tax subtraction is available, even if you open a Maryland 529 account.
How Much Can You Subtract in 2025? Limits and Married Filing Jointly?
| Filing Status | Maximum Annual Subtraction per Beneficiary | Example: Two Children |
|---|---|---|
| Single / Head of Household | $2,500 | $5,000 total |
| Married Filing Jointly | $5,000 ($2,500 per contributor) | $10,000 total |
- The limit is per beneficiary, not per account. You can open multiple accounts or contribute to the same one.
- Multiple contributors (e.g., both spouses) can each claim up to $2,500 per beneficiary on a joint return.
- There is no lifetime limit on the subtraction, only the annual cap.
Pro tip: Contributions made by December 31, 2025, count for the 2025 tax year. Mail checks or ensure online transfers are processed by year-end.
Maryland 529 Carryforward Rules: What Happens If You Contribute More Than $2,500?
Any contribution above the $2,500 annual limit per beneficiary can be carried forward and subtracted in future years—for up to 10 additional years.
Example:
- You contribute $27,500 in 2025 to one child’s College Investment Plan.
- You subtract $2,500 in 2025 and carry forward the remaining $25,000.
- You can subtract $2,500 each year for the next 10 years until the full amount is used.
This carryforward feature makes large lump-sum gifts (e.g., from grandparents) highly tax-efficient.
How to Claim the Maryland 529 Tax Deduction on Your 2025 Return?
- Contribute to a Maryland 529 plan by December 31, 2025.
- Receive Form 1099-Q or keep contribution records (Maryland529.com provides statements).
- On Maryland Form 502 (or 505 for non-residents), enter the subtraction under “Subtractions from Income” (use code for 529 contributions).
- If filing jointly, combine eligible contributions from both spouses.
- Keep records for at least 3 years in case of audit.
Tax software like TurboTax, H&R Block, or TaxSlayer automatically handles Maryland 529 reporting when you enter your contributions.
Always consult a tax professional or visit marylandtaxes.gov for your specific situation.
Additional Maryland 529 Benefits in 2025 (Beyond the Tax Subtraction)
- Tax-free growth and withdrawals — Earnings are free from federal and Maryland taxes when used for qualified higher education expenses (tuition, fees, room & board, books, computers, and up to $10,000/year K-12 tuition per beneficiary).
- Save4College State Contribution Program — Lower- to middle-income families may receive a $250 or $500 direct state match (separate from the tax subtraction). Applications for 2026 are open until May 31.
- High contribution limits — Up to $500,000 lifetime per beneficiary.
- Estate planning — Contributions count as completed gifts for federal estate and gift tax purposes.
Maryland 529 vs. Other States’ 529 Plans: Why In-State Is Best for Maryland Residents
Only contributions to Maryland’s own 529 plans qualify for the state tax subtraction. Out-of-state 529 plans offer no Maryland tax benefit.
Maryland’s College Investment Plan consistently ranks among the top 529 plans nationally for fees, investment options, and in-state benefits.
Frequently Asked Questions About Maryland 529 Tax Deduction 2025
Can I claim the subtraction if I contribute to a grandparent-owned account?
Yes—as long as you are the contributor and a Maryland taxpayer.
Does the subtraction reduce my federal taxes?
No. It is a Maryland-only state income tax benefit.
What if I receive the Save4College match?
You cannot claim the subtraction in the same year you receive a state contribution.
Are there any changes coming in 2026?
The $2,500 limit remains in effect for 2025. Future legislative changes may occur, but none are confirmed for 2026 yet.
Start Saving and Claiming Your Maryland 529 Tax Benefit Today
The Maryland 529 tax deduction in 2025 offers one of the best immediate state tax breaks available to families planning for college. By contributing before December 31, 2025, you can lower your 2025 Maryland tax bill while building a tax-advantaged education fund.
Visit the official site at maryland529.com to open or contribute to an account, check your balance, or apply for the Save4College program.
Disclaimer: This article is for informational purposes only and is not tax or financial advice. Tax laws can change, and your individual situation may vary. Consult a qualified tax professional or the Maryland Comptroller’s Office for personalized guidance. All information is current as of April 2026 based on official Maryland529.com resources.