Virginia 529 Deduction - Account Owner or Account Contributor?

[Lot]

I have a Virginia Invest529 account set up for my daughter. I am the account owner. My daughter is the beneficiary.

If my brother makes a contribution to that account, does he get the Virginia state tax deduction as the contributor? Would I get it as the account owner? Or would there be no deduction? 

I'm finding conflicting information.

In the "State tax deduction or credit for contributions:" section of this post, it indicate that the deduction would go to the account owner - https://www.savingforcollege.com/529-plans/virginia/invest529

However, looking at 58.1-322.03.7.a of the Virginia tax code (https://law.lis.virginia.gov/vacode/title58.1/chapter3/section58.1-322.03/) I saw this line:

"A deduction shall be allowed to the purchaser or contributor for the amount paid or contributed..."

But then, the code goes on to define a contributor as "a person who contributes money to a savings trust account established pursuant to this chapter on behalf of a qualified beneficiary and who is listed as the owner of the savings trust account." (https://law.lis.virginia.gov/vacode/23.1-700/)

So it does not look like my brother would be eligible to make a deduction on his taxes for a contribution to an account he does not own. He could set up an account with him as the owner and my daughter as the beneficiary to capture the deduction on his taxes.

But my question is what happens to the deduction if he makes a contribution to the account I set up?

Thanks for your help with this!

[DanPaul02]

Your brother can contribute to the 529 plan and claim the deduction.  The person who contributes is the person who claims the deduction regardless of who owns the plan.

[Lot]

Thank you, @DanPaul02! Can you provide more details on how you came to this conclusion?

[DanPaul02]

I have been doing income taxes for more than 40 years and have worked in many different states.  In every state, the 529 contribution is claimed by the person who made the contribution.  Reading the various laws can be quite confusing.  Believe me, I have read all of them.  

[Critter-3]

When you open a 529 plan with you as the owner  and you make a contribution to it then YOU  are the owner no matter who the beneficiary will be so you get the deduction.   However if you put money into a 529 plan set up under a different owner then that owner gets the deduction.  Do you see the difference in who gets to claim the credit ?   If so then all the info you posted makes sense and are in agreement. 

So if you make a contribution to a plan you do now own it is like making a gift to the owner of the account and they get the credit for the contribution you made on their behalf. 

[SteamTrain · Accepted solution]

@Lot   @DanPaul02   @Critter-3 

According to the VA-529 FAQs, only the account owner can take the deduction.  (Yes, presuming the VA529 plan people keep up with whatever the current VA tax rules are) :

"Can  anyone make contributions to my account? 

Yes! Anyone may contribute to your Virginia529 account, but only account owners may take the Virginia state income tax deduction for contributions."

________________________________________________

529 FAQs | Learn | Virginia529

[Critter-3]

Ask the state if the beneficiary can only have one account ... or if they  can have multiple accounts as a bene so you can open one in your name as the owner without having to put it into the already established account where there is another owner.  

[SteamTrain]

(Removed an inaccuracy)...see additional information received from user Lot, below

[Lot]

Thanks everyone for your input. I ended up calling the Virginia Department of Taxation customer service line (https://www.tax.virginia.gov/contact-us). The answer from the agent I talked with was that only the owner of the account may claim a deduction and only for contributions that they make. 

If someone makes a contribution to an account they do not own, no one can take any deduction on that contribution. 

In my scenario, my brother making a contribution to an account with my daughter of the beneficiary, for my brother to be able to get the deduction he would have to set up a new account with him as the owner and my daughter as the beneficiary.   

[CARSWSC]

I'm the account owner of three different Virginia 529 accounts.  I have an account for each of my 3 sons.  I've contributed $4K to two of the accounts and $2K to one account--$10K total in 2021.  (I know the maximum that can be contributed to any one account is $4K and still be eligible for the full deduction.) .  When I've entered this info into TurboTax, I'm only seeing a $6K deduction.  I should be getting the full $10K deduction.  Last year, when I had this problem, I called TurboTax and was given a work around.  Prior to the 2020 tax season, I never had this problem.   Can you provide the workaround to fix this or update your software?  

[FangxiaL]

Follow these steps to resolve your issue:

Within  VA state return:

1. Click Edit next to Virginia529 Account Plan
2. On the next screen, select Yes, I've had one of these 529 plans
3. On the screen  Tell Us About your Virginia529 or Prepaid Tuition Plan, check I made a payment or contribution in 2021 
4. Continue to the screen Enter Your Account Info and Activity
5. Enter Owner, Plan Type, and 2021 Contribution separately by adding another account. Click Done 

The next screen will show your 2021 College Savings Contributions of $10,000 and 2021 College Savings deduction of $10,000.

@CARSWSC