North Carolina Governor Mike Easley yesterday signed SB 1741, which provides a state tax deduction on contributions only to the North Carolina plan. You may recall the original bill (HB 770) provided a deduction on contributions up to $10,000 for single filers and $20,000 for joint filers to the North Carolina plan. We opposed this in our letter to the Senate Finance Committee on June 29. Section 24.12 of SB 1741, effective for taxable years beginning on or after January 1, 2006, reduces the amount of the deduction to $750 for single filers and $1500 for joint filers if the taxpayer’s adjusted gross income is less than the following:
Filing Status
AGI
Married, filing jointly
$100,000
Head of Household
80,000
Single
60,000
Married, filing separately
50,000
SB 1741 also includes a section that requires the Revenue Laws Study Committee (“Committee”) to study the issue of providing income tax deductions for all contributions to section 529 plans. The Committee is required to report their recommendations and legislative proposals to the 2007 General Assembly. We supported this section in our June 29th letter to the Senate Finance Committee and agreed to help in any way we can.
