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Division of Taxation

NOTICE: New Jersey’s Gross Income Tax Treatment of IRC Section 529 Savings Plans and Private, Religious, Elementary, and Secondary Schools

The federal Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, expanded the benefits of IRC section 529 savings plans to include qualified tax-free distributions that are made to pay for tuition at private, religious, elementary, and secondary schools in addition to college.

For New Jersey Gross Income Tax purposes, N.J.S.A. 54A:6-25 excludes qualified distributions from a State tuition account from taxable gross income. A qualified distribution means a distribution from a qualified State tuition program account that is used for qualified higher education expenses. A "higher education institution" is defined under N.J.S.A. 18A:71B-36 and means an eligible educational institution as defined in or for purposes of section 529 of the federal Internal Revenue Code of 1986, 26 U.S.C.s.529.

Because New Jersey law incorporates the provisions of IRC section 529, New Jersey follows the federal expansion and considers a withdrawal from an IRC section 529 savings plan used for tuition at private, religious, elementary, and secondary schools a qualified higher education expense for New Jersey Gross Income Tax purposes. 

Last Updated: Thursday, 02/20/20