#5 Consider contributing to a 529 Plan or ABLE Account
Before the year’s end, put money in a 529 plan. It won’t lower your federal tax payment, but it might lower your state tax bill. In more than 30 states, you can deduct at least a part of your 529 plan contributions from your state income taxes. Most states require that you pay into your own state’s retirement plan in order to qualify for a tax deduction. However, some states let you pay into any state’s retirement plan.
You can deposit up to $16,000 this year into an ABLE account if you have a family member who needs special assistance. This account enables people with certain disabilities to save money without jeopardizing their eligibility for government benefits.Â
If you live in one of the states that do provide a tax credit for ABLE accounts, you can deduct your contribution even though you are not required to fund your own state’s plan. For instance, Michigan permits people to deduct up to $5,000 (or $10,000 for a married couple) from their contributions to the state’s ABLE account.
