Taxes on Reinvestment

Natalie6 · ‎March 19, 2020

Hi, I pulled money out of mutual funds in 2019 and reinvested a portion of it in NEST 529 accounts for my children's education. It appears the State of Nebraska taxed me on this money but since it was re-invested into the 529's, should it be tax free?

JohnB5677 · ‎March 19, 2020

The money that you got by selling Mutual Funds will be taxable.

However, The Nebraska College Savings Plan allows residents to contribute money towards their NEST accounts and receive a Nebraska income tax deduction for the contribution amount up to $10,000. Contributions to any other state’s 529 plan are not deductible for Nebraska taxes.

So in summary, the profit from the Mutual funds will be taxed both federally and by Nebraska. There is no deduction for the federal 529 contribution. but there is for Nebraska.

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View solution in original post

JohnB5677 · ‎March 19, 2020

The money that you got by selling Mutual Funds will be taxable.

However, The Nebraska College Savings Plan allows residents to contribute money towards their NEST accounts and receive a Nebraska income tax deduction for the contribution amount up to $10,000. Contributions to any other state’s 529 plan are not deductible for Nebraska taxes.

So in summary, the profit from the Mutual funds will be taxed both federally and by Nebraska. There is no deduction for the federal 529 contribution. but there is for Nebraska.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

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Taxes on Reinvestment