If my parents open a 529 for my nephew in pa, will they get a tax deduction? Will that affect his fafsa? He currently lives in VA. Can you transfer from PA to VA no problem if they stay in Virginia?
You'll need to sign in or create an account to connect with an expert.
There is not a federal tax benefit for contributing to a 529 plan - the benefit of contributing to a 529 plan is that any earnings generated are tax free if the funds are used for qualifying educational purposes.
With that being said, some states do have deductions on the state income tax return for contributions made to their state's 529 plan. I am not sure what state your parents are residents of - but you mentioned Virginia, so I am thinking your parents may reside in Virginia. if that's the case, Virginia 529 account holders who are Virginia taxpayers may deduct contributions up to $4,000 per account per year, with an unlimited carryforward to future tax years, subject to certain restrictions. Note the beneficiary does NOT have to be a Virginia resident, nor does the beneficiary have to attend a college in Virginia.
As for if their contributions would impact FAFSA, I cannot comment on that as it is not an income tax question. I would recommend contacting the financial aid office of the college to ask that question.
So my parents live in PA and if they open a 529 for my nephew in PA, would that help their tax state deduction in pa?
Under current laws, Pennsylvania allows contributions to Section 529 Tuition Savings Accounts to be claimed as a deduction. Pennsylvania taxpayers can deduct up to $18,000 in contributions per beneficiary per year ($36,000 if married filing jointly, assuming each spouse had income of at least $18,000) from their Pennsylvania taxable income for the purposes of determining their state income taxes.
Ahh so they can claim a tax deduction on this?
If they are PA residents, then yes, they can deduct a contribution to a 529 plan with their nephew as beneficiary on their PA state return, within the limitations listed in the prior post.
Still have questions?
Make a postAsk questions and learn more about your taxes and finances.
LaughTrack
Level 4
lottavio1
New Member
DisneyDiva
New Member
lecach
New Member
sarndt03
New Member
Did the information on this page answer your question?
You have clicked a link to a site outside of the TurboTax Community. By clicking "Continue", you will leave the Community and be taken to that site instead.