Starting in January 2025, new tax credits for matching contributions to employees’ PA 529 College and Career Savings Program and the PA ABLE savings program for people with disabilities become available and businesses should use them to help their employees save for the future, state officials and legislators said Oct. 22.
Pennsylvania Treasurer Stacy Garrity and PA Chamber of Business and Industry President and CEO Luke Bernstein joined State Reps. Kristin Marcell (R-178), Paul Friel (D-26), and Greg Scott (D-54), as well as State Senate Majority Leader Joe Pittman (R-41) and PA Sen. Camera Bartolotta (R-46) — all of whom played key roles in the passage of related legislation earlier this year — to encourage use of the tax credits.
“This new tax credit will help Pennsylvanians save for the future and make our businesses more attractive places to work,” Garrity said.
Beginning next year, employers who make contributions to their employees’ PA 529 and PA ABLE accounts can get a 25 percent tax credit on up to $500 in matching contributions per employee per year.
The PA 529 helps families save for future educational expenses like tuition, fees, books, equipment, room and board, and more at qualifying technical, collegiate, and apprenticeship programs.
The PA ABLE assists individuals to save for a wide array of disability-related expenses, and offers seven different savings and investment options, including an interest-bearing checking account, and PA ABLE account owners can contribute up to $18,000 per year. Contributions can be deducted from PA state income taxes, and account owners pay no federal or state income taxes on account growth when used for qualified expenses.
“I want to commend and thank Treasurer Garrity for supporting Pennsylvania employers and families,” Bernstein said. “This is a win for our workforce, our families, and the future of Pennsylvania’s economy.”
The PA 529 tax credit, originally contained in House Bill 1745, co-prime sponsored by Marcell and Friel, was included in this year’s Tax Code bill, which was signed into law by Gov. Josh Shapiro and is now Act 56 of 2024.
The new credit also applies to matching contributions made to an employee’s PA ABLE account, and Pennsylvania is the first state in the nation to establish this type of credit for its ABLE program.
“This legislation, which passed the House unanimously, provides a new and creative approach to support families and businesses as they invest in the next generation of students,” Friel said.
Marcell added that the new tax credit is a smart investment in workforce development.
“By allowing employers to contribute to their employees’ PA 529 accounts, we’re helping businesses attract and retain talent while empowering workers to plan for their futures without the burden of student debt,” she said. “This initiative will play a key role in strengthening Pennsylvania’s workforce and ensuring that we remain competitive in today’s economy.”
Act 56 also includes a provision allowing funds in a PA 529 plan to be rolled over to a Roth IRA without any state tax implications. That provision was originally introduced in House Bill 2119, sponsored by Scott.
“I’m excited for this important step forward in helping Pennsylvania families maximize the value of their hard-earned savings,” Scott said. “It’s about giving our residents the options they deserve while keeping more of their money in their own hands.”
Sen. Pittman sponsored the amendment that incorporated the tax credits and the Roth IRA rollover provision into this year’s Tax Code bill, Senate Bill 654 (now Act 56) sponsored by Bartolotta.
“The PA ABLE program is a useful tool serving individuals with disabilities, and the PA 529 program is a great way to save for education,” Sen. Pittman said. “During these challenging economic times, the new incentives can have a significant impact and I’m pleased the changes we made will help families to better prepare for the future.” “Families everywhere will have some extra support as they save for the future, so the next generation is able to afford the education they need,” added Bartolotta. “The future in Pennsylvania looks a little brighter.”