529 pa

Forum|Forum|2 years ago
June 26, 2024
5 replies
48 views

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?

Ask the Experts - Retirement II - June 2024

K M W

Employee Tax 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.

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jad56061Author

Level 2

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?

K M W

Employee Tax Expert

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.

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