New Jersey Deductions for Higher Education Expenses and Savings
Beginning on January 1, 2022, the New Jersey College Affordability Act allows three Income Tax deductions for New Jersey taxpayers with gross income of $200,000 or less. These deductions include contributions to NJBEST, tuition costs for New Jersey colleges and universities, and payments made under NJCLASS.
Contributions to a New Jersey Better Educational Savings Trust (NJBEST)
529 College Savings Plan NJ BEST Program
- Taxpayers with gross income of $200,000 or less can now contribute to a NJ 529 plan under the NJ BEST program and receive up to a $10,000 deduction.
- The state income tax deduction is allowed to any taxpayer who contributes to a NJBEST 529 plan. Parents, grandparents, other family members and friends can make the tax-deductible contribution for the benefit of an account beneficiary.
- Taxpayers will need to consider the fees associated with a NJ 529 plan. Prior to 2021, Morningstar had ranked NJBEST among the worst 529 plans in the nation because of high fees and few incentives. In 2021, Morningstar has upgraded their rating from negative to neutral due to the newly introduced deduction incentive.
One-time Grant
- New Jersey will make a dollar-for-dollar matching grant, up to $750, on the initial deposit when opening a NJBEST account on or after June 29, 2021. The matching grant is limited to no more than one account per beneficiary.
Tax-free Scholarship
- Students who have a NJBEST account and go to college in New Jersey can receive a tax-free scholarship. Effective June 7, 2021, the maximum NJBEST scholarship amount was increased to a total of $3,000. The amount of scholarship awarded depends on the history of the account. The scholarship can only be used for college.
Deduction for In-State Higher Education Tuition Costs
- Beginning in 2022, a taxpayer with gross income of $200,000 or less shall be allowed a deduction, not to exceed $10,000, from the taxpayer’s gross income for tuition costs paid to an in-State institution of higher education during the taxable year. No deduction is allowed for tuition costs paid to an out-of-state institution of higher education. The deduction is allowed for tuition costs related to enrollment or attendance of the taxpayer, spouse or dependent of the taxpayer at the institution.
New Jersey College Loans to Assist State Students Loan Program (NJCLASS)
- A taxpayer with gross income of $200,000 or less shall be allowed a deduction, not to exceed $2,500, from the taxpayer’s gross income in the amount of principal and interest payments paid on student loan under the NJ College Loans to Assist State Students Loan Programs.
If you have any questions or need additional information, please do not hesitate to contact your Maillie representative.
