Harrisburg — Families that contribute to a Pennsylvania 529 College Savings Program (GSP) account can save on their taxes, according to state Treasurer Rob McCord.

“529 plans are generally considered one of the best ways to save for college because of the many valuable tax benefits. For Pennsylvania 529 College Savings Program savers, this includes a generous state tax deduction for contributions,” said McCord.

“(In 2010) Pennsylvanians saved $15.8 million on their state income taxes as a result of investing in a 529 plan. Anyone can contribute, family members, friends, and neighbors, and take advantage of this deduction.”

Taxpayers can deduct up to $13,000 per beneficiary in PA 529 contributions made by Dec. 31 from their Pennsylvania taxable income on state tax returns. Married couples filing jointly can deduct up to $26,000 per beneficiary if each spouse has taxable income of at least the amount deducted.

The treasurer also highlighted the gift tax exclusion, which is a benefit for grandparents or family members who are able to contribute a larger amount to a PA 529 account. Family and friends can contribute up to $65,000 in a single year or $130,000 for a married couple filing jointly for each beneficiary without incurring federal gift tax consequences. That assumes no other gifts in the next four years.

PA 529 savers receive other tax advantages too, said McCord. Earnings are not subject to yearly taxes as they grow, and when used for qualified expenses, such as tuition or room and board, earnings are tax-exempt when withdrawn.

The state also has another 529 plan, the PA 529 Investment Plan (IP).

The primary difference between the two plans is the way savings grow. Growth in the PA 529 GSP is based on tuition inflation.

For example, if you save enough for a semester at one of Pennsylvania’s State System of Higher Education universities today, you will have enough for a semester there in the future, no matter when or how much tuition has gone up.

Returns in the PA 529 IP are based on financial market performance. The PA 529 IP has more than a dozen conservative and aggressive investment options from Vanguard, a financial services company.

For information, visit www.PA529.com or call 1-800-440-4000.