Your contribution isn’t tax-deductible on your federal return, but two-thirds of the states do offer an income-tax deduction for contributions. Most require that you contribute to your own state’s plan to get the break (Arizona, Kansas, Maine, Missouri and Pennsylvania allow deductions for contributions to any state’s plan). But each state also has different rules about who can take the deduction for their contributions.
Many states, such as Ohio, let residents deduct their 529 contributions to the state’s plans even if they are not the account owner. If you live in Ohio and your niece’s parents already have an account for her in that state, for example, you can deduct up to $2,000 you contribute to her account per year (whether filing as single or jointly), and you can apply any contributions above that limit to future years’ taxes. If your niece’s parents don’t have an account for her in your state, you can open one for her yourself. There’s no limit to the number of 529 accounts that people can have for one student, and the accounts don’t need to be in the state where the student lives.
If your state is one of those states that has a 529 plan deduction, TurboTax will prompt you to enter your 529 contributions when you get to the credits/deductions portion of your state tax interview.
Answers are correct to the best of my ability but do not constitute legal or tax advice.
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