Q. Am I able to take a $4000 state tax deduction for each of the next 5 years to cover that initial lump sum payment?
A. Yes. The fact that you didn't take the deductions, in earlier years, when you could have, does not prevent you from taking it now and in future years. Furthermore, the fact that the beneficiary is no longer a student, or your dependent, also does not preclude taking the deduction.
You also have the option of filing amended state returns to claim the $4000 deduction for 2024, 2023 and 2022; but not earlier years (there's a three year limit).
