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NY 529 non-qualified withdrawal and NYS reclaim of tax deduction
My understanding is that if you make a non-qualified withdrawal from a NY 529 plan, you pay federal income taxes on the earnings portion of the amount withdrawn, and possibly a 10% penalty on that amount as well. (In my case, the funds were withdrawn to match an academic scholarship that my daughter received, so there was no 10% penalty.) For NY state taxes, the state "reclaims" (or claws back) the state tax deduction that was received when the contribution was made. This is done by taking the amount reported on the federal return and adding it to the NY return on IT-201 line 16, subtracting that same amount on IT-201 line 30 as a subtraction, and adding the amount of the withdrawal on IT-201 line 22. Do I have this much right?
If so, I have some questions:
(1) What if part of my contributions were not tax deductible? For example, NYS only gives you a tax deduction of up to $10,000 per year. What if I contributed $15,000 one year? I should not have to pay a "clawback" tax on the amount that I never received a deduction on, right? How is it determined whether my withdrawal is taken from the $10,000 tax-deductible portion, or the $5,000 non-deductible portion, and how do I represent that in TurboTax?
(2) Similarly, let's say I've made $50,000 in contributions over the years, and now my account has grown to $75,000. If I take $50,000 in qualified withdrawals, I have now taken out as much as I put in and received a deduction for. What if the remaining $25,000 is a non-qualified withdrawal. Does NYS still issue a "clawback" tax on that amount? If not, how is that represented?
(3) Now, what if I inherited a 529 account (from a grandparent) in addition to my own account? Does the state do a "clawback" for the income tax deduction that the deceased received? In other words, do I have to pay a penalty for a benefit that someone else received? If not, again, how is it determined which "bucket" of funds the withdrawal comes from (the inherited bucket vs my bucket)?
Thank you in advance!