Minnesota enacts new tax credits for 529 plan contributions and stillborn children

On April 7, 2025, the Minnesota State Legislature introduced Senate Bill 3301, a significant piece of legislation aimed at providing financial relief to families through two key tax credits: the 529 Plan Credit and the Credit for Parents of Stillborn Children. This bill seeks to address educational savings and the emotional and financial burdens faced by parents experiencing stillbirth.

The 529 Plan Credit allows Minnesota residents to claim a tax credit of 50% on contributions made to qualified 529 accounts, with a maximum credit of $500. This credit is designed to encourage families to save for education, with income thresholds determining eligibility. For individual filers, the credit begins to phase out for those with adjusted gross incomes exceeding $78,340, while married couples face a more gradual reduction based on their combined income. This provision aims to make educational savings more accessible, particularly for middle-income families.

In addition, the bill introduces a Credit for Parents of Stillborn Children, offering a $2,000 tax credit for each stillbirth, provided the parents can present a certificate of birth resulting in stillbirth. This credit is intended to provide financial support during a profoundly difficult time, acknowledging the emotional and economic impact of such a loss. The credit is refundable, meaning that if the credit exceeds the taxpayer's liability, the state will refund the difference.

Debate surrounding Senate Bill 3301 has highlighted its dual focus on education and family support, with proponents arguing that it addresses critical needs in Minnesota. However, some lawmakers have raised concerns about the fiscal implications of these credits, particularly the potential strain on the state budget. The bill includes provisions for annual adjustments to income thresholds, ensuring that the credits remain relevant over time.

The implications of this legislation are significant. By incentivizing educational savings, the bill could lead to increased college enrollment and reduced student debt in the long term. Additionally, the support for parents of stillborn children reflects a growing recognition of the need for compassionate policies that address the complexities of family life.

As Senate Bill 3301 moves through the legislative process, its outcomes will be closely monitored, with potential impacts on Minnesota's families and the state's financial landscape. The bill's progress will be a key focus in upcoming sessions, as lawmakers weigh the benefits against the fiscal responsibilities of the state.