Texas lawmakers implement new rules for 529 plan tax credits effective January 2026

On February 4, 2025, Texas lawmakers introduced Senate Bill 1097, a legislative proposal aimed at enhancing the state's 529 college savings plans by allowing taxable entities to sell or assign tax credits associated with their contributions. This bill seeks to address the growing need for accessible higher education funding options in Texas, particularly as college costs continue to rise.

The primary purpose of Senate Bill 1097 is to create a more flexible framework for businesses and individuals contributing to Texas 529 plans. By permitting the sale or assignment of tax credits, the bill aims to incentivize contributions to these educational savings accounts, ultimately benefiting students and families across the state. Key provisions include stipulations that ensure the sale of credits does not extend the carry-forward period for these credits and that once a credit is claimed, it cannot be reused by another entity for additional tax benefits.

Debate surrounding the bill has highlighted concerns about potential misuse of the tax credit system and the implications for state revenue. Critics argue that allowing the transfer of credits could lead to a loss of tax revenue, while supporters contend that the measure will stimulate investment in education and provide much-needed financial support for families saving for college. Amendments to the bill may be proposed to address these concerns, ensuring that the benefits of the legislation do not come at the expense of the state's fiscal health.

The economic implications of Senate Bill 1097 could be significant. By encouraging more contributions to 529 plans, the bill may help alleviate the financial burden of higher education for Texas families, potentially increasing college enrollment and graduation rates. Additionally, the measure could foster a more robust educational funding ecosystem, attracting businesses to invest in the future workforce.

As the bill progresses through the legislative process, experts suggest that its success will depend on balancing the interests of taxpayers, educational institutions, and the state’s budget. If passed, Senate Bill 1097 is set to take effect on January 1, 2026, applying to reports due after that date. The outcome of this legislation could shape the landscape of educational funding in Texas, making it a critical issue for lawmakers and constituents alike.