Education is a valuable investment, and for Marylanders, managing its costs efficiently is key. While often associated with saving for a child’s future college, the Maryland College Investment Plan (MCIP) offers powerful, flexible strategies for adults looking to fund their own education or strategically manage student loan debt. Let’s explore how the MCIP can work for you.

Invest in Yourself: Open an MCIP for Your Own Education

That’s right – the MCIP isn’t just for kids. You can open and be the beneficiary of your own Maryland 529 plan. This makes it an excellent choice if you’re returning to school for a new degree, vocational training, or a master’s.

Key Benefits for Self-Funders:

• Maryland State Tax Deduction: As a Maryland resident, your contributions to the MCIP are deductible from your state income tax, up to $2,500 per beneficiary (or $5,000 for joint filers). This immediate tax saving is a direct benefit to your education fund.
• Tax-Free Growth & Withdrawals: Your investments grow free from federal and Maryland state taxes. When withdrawn for qualified higher education expenses, these funds are also tax-free, maximizing your education dollars.
• Broad Qualified Expenses: The MCIP covers tuition, room and board (if enrolled at least half-time), books, supplies, and other required fees at eligible vocational schools, colleges, and graduate schools.
• Flexibility: Whether you’re advancing your current career or making a change, the MCIP provides a tax-advantaged way to finance your professional development.

Strategically Tackle Student Loans with Your MCIP

Thanks to the federal SECURE Act, which Maryland’s 529 plan conforms to, you can use tax-free MCIP distributions to repay up to $10,000 in qualified student loans for the beneficiary of the account. This includes an additional $10,000 for each of the beneficiary’s siblings (a lifetime limit per individual).

Smart Student Loan Strategies for Marylanders:

• Utilize Leftover Funds: If education costs were less than expected, surplus MCIP funds can now be applied to student loans.
• Pay Parent PLUS Loans: MCIP account owners can change the beneficiary to a parent, allowing that parent to take a qualified distribution (up to the $10,000 limit) to repay their own federal or private parent loans.
• Maryland “Discount” on Loans: Contribute to your MCIP (claiming the Maryland state income tax deduction) and then make a qualified distribution to repay up to $10,000 of your student loans. You effectively get a state tax break on a portion of your loan repayment.

Transferring Beneficiaries with Ease

A significant advantage of the MCIP is the ability to change the account beneficiary at any time to another qualified family member without tax implications. This provides excellent flexibility if initial education plans shift.

Final Thoughts

The Maryland College Investment Plan is a versatile and valuable asset for Maryland residents. It’s not just for saving for a child’s distant future; it’s a powerful tool for your own educational pursuits and smart student loan management.

Navigating education financing can be complex. PSA CPA is here to help you understand how to best leverage your Maryland 529 plan and integrate it into your overall financial strategy. Contact us today at (301) 879-0600.