Tax questions

February 24, 2000

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

I recently took out the Maryland Prepaid College Fund for my daughter. I've heard the contribution to the Maryland Prepaid College Fund is tax-deductible. How do you put them on your federal and state returns for deduction?

Currently, there is only a state deduction of up to $2,500 for payments to the Maryland Prepaid College Trust under the Maryland Higher Education Investment Program. This deduction is reported as an "Other subtraction" on Form 502, page 1, line 14 and coded as "y." There is no federal deduction for these payments. The federal tax advantage is a deferral of any income earned on the payments while in the trust. Your daughter reports the deferred income when the program pays her college tuition. See Administrative Release 32 for further information or visit the program's Web site at:

Lambert G. Boyce Jr. CPA, CFP, Clifton Gunderson, LLC, Timonium

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

To ask a tax question, call Sundial, The Sun's telephone information service, at 410-783-1800. Call 410-268-7736 in Anne Arundel County, 410-836-5028 in Harford County, 410-848-0338 in Carroll County. Using a touch-tone phone, punch in the four-digit code 6225 after the greeting. You can also submit questions by e-mail through The Sun's Web site, Click on Business.

Selected questions will be answered in the Business section. No questions will be answered personally.

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