Nebraskans may deduct employer contributions to their state college savings accounts from their state income taxes under a bill passed by the Legislature Aug. 3.
Under LB1042, introduced by Sen. Andrew La Grone of Gretna, an individual’s federal adjusted gross income will be reduced by the amount of any contribution made by the individual’s employer into the individual’s Nebraska educational savings plan trust account.
The deduction is for taxable years beginning on or after Jan. 1, 2021, and may not exceed $5,000 for those married filing separately or $10,000 for other filers.
The bill prohibits any state agency that provides benefits or aid to individuals based on financial need from taking employer contributions into account when determining an individual’s income.
Additionally, LB1042 eliminates the provision in current law that allows only an account’s participant, or registered owner, to take a state income tax deduction equal to contributions they make to their account, within certain limits.
The bill includes the amended provisions of LB1083, introduced by Lincoln Sen. Adam Morfeld. The provisions allow the state treasurer to credit private qualified contributions to the Meadowlark Endowment Fund or to accounts opened under the Meadowlark Program at the direction of the donor.
LB1042 prohibits any money accrued in the College Savings Plan Program Fund from being used to pay expenses associated with attending kindergarten through 12th grade.
It also prohibits private contributions to the Meadowlark Endowment Fund or accounts opened under the Meadowlark Program from being used to pay those expenses.
Finally, LB1042 directs the state treasurer to transfer $59,500 from the College Savings Plan Expense Fund to a state Department of Revenue fund to defray the bill’s implementation cost.
LB1042 passed on a vote of 47-0 and takes effect immediately.