We received the MD 529 State Contribution. Do we enter this amount in the "Enter State Contribution to MD College 529 Plan Included in Federal Income" section?

[vzweiner]

The wording is confusing, because the heading indicates "Federal Income" and the question does not. The contribution came from the state and directly into the 529 accounts.

[AmyC]

Yes, the question is trying to say the the money is being taxed by the federal government but eligible for the MD credit.

[vzweiner]

Thank You for your response. Let me rephrase my question about this.

According to the State of Maryland webpage, 

"If you receive a State contribution for any Account in a given year, you are not eligible in that year for the income deduction on your State taxes for contributions that you made to that or any other College Investment Plan Account."

When entering the information on turbo tax, it does not give an option to go past the question about entering the amount of money put into the 529 account to not claim the tax break if MD has contributed to the account.

Thank You again!

[KrisD15]

My advice is that if you got a State Contribution, you do not enter any contributions you may have made the same year.

[SKjames]

Yes, it does seem like the best option would be to not enter personal contributions to an MD529 plan for any year in which you receive the state contribution ($250 or $500).

The Turbo Tax prompt asks "Did you receive a contribution from Maryland to a college 529 plan that was included in Federal Income in 2019?" This makes me think that there is a place on the income section of the federal return where state contributions ($250 or $500) should be listed and would be counted as federally taxable income. However, I looked several times but saw no place where the Maryland contribution ($250 or $500) could be listed as income. Can someone clarify whether we are supposed to claim the $250 or $500 as federal income and, if so, where you list that on the federal return.

Thanks!

[DMarkM1]

The question refers to receiving a payment from the 529 Plan.  If the 529 payment was used for qualified education expenses then it would not be included in the federal tax return.  If the 529 distribution was not used for qualified education expenses then it would be included as income on the federal return.  The entries for those are made in the "Education" topic form 1099-Q entry.  

[SKjames]

Thank you for your explanation. If the question is referring to a distribution, it really needs to be reworded. As is, it is very confusing and very misleading.

The software also needs to have the following follow-up question immediately after it has you enter the amount you contributed to MD529 plans:  "Did you receive a state contribution from Maryland to your MD 529 plan? (Maryland College Investment Plan (MCIP) Account Holders who receive a State contribution are NOT eligible to receive an income deduction for contributions to the MCIP account that received the State contribution. See Save4College State Contribution Program for more information.)"

[bk003]

Where should the Maryland contribution be entered on the Federal forms?

[DMarkM1]

If you received a form 1099 such as 1099-G or 1099-MISC, you would enter that form information in the "Other Common Income"  topic.  If you did not receive an income reporting form (1099), you can enter the contribution as "Miscellaneous" "Other Reportable Income" in the "Less Common Income" topic.  The description could be "MD 529 Contribution" for example.

In the MD state interview in the "Income" section you can take a subtraction from MD income for that state contribution (income) entered in the federal forms.  You cannot take any other MD deduction for 529 contributions in the year you received a MD state contribution.