I live in CT, but work and earn 100% of income in NY. I have deducted NY 529 contributions from NY previously, but now told I cannot as I am a non NY resident?

[DianeW777]

It depends. See the following information about 529 Plans for nonresidents working in New York (NY).

• Out of State Savers -- Qualify for a New York State tax deduction: If you work in New York and pay New York State income taxes, you may be entitled to a state tax deduction of up to $5,000 ($10,000 if you're married filing jointly) on contributions to your Direct Plan account.*
  • *New York State tax deductions may be subject to recapture in certain additional circumstances such as rollovers to another state's 529 plan, withdrawals used to pay elementary or secondary school tuition, rollovers to a beneficiary's Roth IRA account, or qualified education loan repayments as described in the Disclosure Booklet and Tuition Savings Agreement. State tax benefits for non-resident New York taxpayers may vary. Tax and other benefits are contingent on meeting other requirements. (From the link above)
  • Direct Plan Tax Benefits - Review for your situation.

If you do decide you should amend, then use the instructions below. An amendment for the state begins with the federal return even if you are not amending the federal.

• How do I amend my federal tax return for this year?

[simpsonjp]

Thank you, I apreciate the reply. Unfortunately, it depends is tough to understand for two reasons:

1) TurboTax will not allow me to advance my NY return on the basis that any amount as a 529 deduct from a non-NY resident is unacceptable. So how is TurboTax making this determination? The decision appears binary, which seems to not depend on much beyond being a non-NY resident.

2) Understand it's not anyone's problem but mine, but I chose NYs plan given the tax deduction as a NY State tax payer. TurboTax has accepted this deduct for years under my same situation, but TurboTax changed only on this 2024 year's filing attempt.

[KeshaH]

If you'd like, we can look at your return and see exactly what you see to help come to a resolution. The return will be scrubbed and won't include any of your personal details.

If you're using TurboTax Online:

Once you're logged in to your account and have your amended return open,

- on the left hand panel, click on Tax Tools and then choose Tools

- on the pop up window, select Share my file with Agent

- you'll see a message saying you'll give us a copy of your tax return. Your personal information will be changed so we can't see any private information.

- click okay and you'll get another message with a token

If you're using TurboTax Desktop:

• Click on Online in the top menu of TurboTax Desktop for Windows
• Select 'Send Tax File to Agent'
• Write down or send an image of your token number and state then place in this issue.
• We can then review your exact scenario for a solution

Please reply to this message with your token so that we can further assist you. Let us know all other states that are included on the return.

[simpsonjp]

Really appreciate it. token here: 1302826

[KeshaH]

Thank you for sending over your token.

Your tax return properly includes the 529 deduction in determining your overall taxable income. However, for nonresidents, the 529 contribution isn't allocated to NY to determine your NY source income (see screenshot below from IT-225 instructions). This is the way that this deduction has worked for at least the past few years.

So, you do get a tax benefit in NY for contributing to a 529 plan but it's very small since you're not able to allocate that deduction to reduce your NY source income. The good news is that the increase in tax on NY is offset by a decrease in tax in CT, so you're still netting out to the same overall state tax in either scenario. 

[zhnfs]

not 100% right not all NY tax will become credit for NJ/CT because NY has a higher tax rate