Hi, my kid is a freshman at UVA, and we are considering opening two 529 accounts between my wife and me to maximize the Tax deduction next year. Is this realistic? My wife and I jointly declare the taxes.
Virginia allows up to $8k tax deduction for couples, so I wondered if we opened the two 529 accounts for my kid, and each one deposited $10k or more, will this help us to get the $8k deduction?
Q. To get the max $8k deduction, do we (my wife and I) need to open a 529 account for our Kid, or just one 529 account with $8k in the balance?
A. Open two separate accounts.
You appear to have found a loop hole in the way Virginia handles this deduction. Every other state (that I know of) only allows a deduction "per beneficiary". But VA allows a deduction "per account". The fact that you will have two separate owners seems to make that position stronger.
This document appears to allow the multiple deductions https://www.tax.virginia.gov/laws-rules-decisions/rulings-tax-commissioner/10-240 .
Yes, account owners who are Virginia taxpayers may deduct contributions up to $4,000 per account per year with an unlimited carryforward to future tax years. So any amount in excess of the $8,000 is carried forward.
Thanks
To get the max $8k deduction, do we (my wife and I) need to open a 529 account for our Kid, or just one 529 account with $8k in the balance?
Also, my wife doesn't work; if she opens a 529 for our kid and deposits $4k, will she have a problem with the IRS? The source of money will be from my banking account.
The deduction is per account so each of you would open an account and each contribute at least $4,000 for the maximum deduction. Doesn’t matter that she is not working.
Q. To get the max $8k deduction, do we (my wife and I) need to open a 529 account for our Kid, or just one 529 account with $8k in the balance?
A. Open two separate accounts.
You appear to have found a loop hole in the way Virginia handles this deduction. Every other state (that I know of) only allows a deduction "per beneficiary". But VA allows a deduction "per account". The fact that you will have two separate owners seems to make that position stronger.
This document appears to allow the multiple deductions https://www.tax.virginia.gov/laws-rules-decisions/rulings-tax-commissioner/10-240 .