CT 529 contribution not deducting correctly

Forum|Forum|3 years ago
February 7, 2023
1 reply
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I am doing my CT taxes. We moved to CT in early 2022, so it is a part-year return, filing MFJ. After moving to the state, we opened a CHET account and contributed $10k. But when I enter the contribution during the interview, my refund only goes up by about $40. How can this be correct?

TurboTax Home & Biz Windows

Best answer by AmyC

Token is 1065659 Thank you.

Thank you. I can see on line 50, the full amount is being taken on your return. So, I traced it through CT. That money plus exempt dividends are combined for line 52, a subtraction that carries to line 4.

CT line 1 - starts with your federal AGI

Line 2 - additions

Line 3 - subtotals

Line 4 - your line 52 subtraction

Line 5 - CT AGI.

Line 6 - CT income

About half the states use the ratio method of taxation, which includes CT and is causing your concern. CT is one of the states that has found a way to garner the highest tax possible. CT determines the tax on your entire income, to put you in the highest bracket possible, then multiplies by the percentage of income earned there.

Because the $10,000 is part of your line 5 CT AGI, the needle barely moves with it. If CT taxed only CT income using their tax brackets, you would see the difference.

ThomasM125

Level 15

The money you contribute to the CHET account is not tax deductible. It's tax advantage is that the interest income on money you contribute is not taxable if you use the money for qualifying education expenses.

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shaylakeyAuthor

Level 2

That is flat out wrong. See this CT Dept of Revenue page confirming there is a $10k income tax deduction for CHET contributions. https://portal.ct.gov/OTT/Financial-Wellness/CHET/Connecticut-Higher-Education-Trust---CHET#:~:text=Connecticut%20families%20can%20take%20an,program%20offers%20on%2Dline%20enrollment.

Why does the program not calculate that correctly?

ErnieS0

Level 15

You don’t say what your income was. Your CHET contribution may have reduced your income to $0 or a very low level since you were a part-year resident.

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