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Lainyb
Returning Member

Virginia 529 Plans

Are there any tax advantages or disadvantages to contributing a $15-20k lump sum to a Virginia 529 plan all in one year, versus spreading it out over multiple years? Is it different for federal versus state taxes?

 

This would be parents contributing to an account for a child, nothing to do with grandparents, which I understand can have different rules.

3 Replies
LauraJCPA
Employee Tax Expert

Virginia 529 Plans

Hi, Lainyb!

 

Contributing to a 529 Plan is a great way to put money aside for your child's education!

 

There are no limits on the amount you can contribute on an annual basis but the cap in Virginia for how much you can contribute in total is $500,000 for a single beneficiary. For K-12 private or religious school tuition you can contribute up to $10,000 per year.

 

As far as tax benefits are concerned, any withdrawals used for the beneficiary's qualified education expenses are tax free and the earnings in the account are also tax free. Plus, Virginia taxpayers may deduct up to $4,000 per account per year from your Virginia state individual income taxes!

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Lainyb
Returning Member

Virginia 529 Plans

Does that mean there is no federal deduction or tax break?

Does the unused $4k deduction for VA get rolled over from year to year, and if so, is there a time limit? 


Anything else to consider that we hadn't thought of?

LauraJCPA
Employee Tax Expert

Virginia 529 Plans

Hi, Lainyb!

 

You are correct, there is no deduction for these contributions on your federal return but the earnings are not taxable nor are the withdrawals as long as they are used for qualified expenses.

 

As for Virginia f you are under age 70 on or before December 31 of the taxable year, enter up to $4,000 of contributions during the taxable year to each Virginia529 account (Virginia 529 prePAID, Virginia 529 inVEST, College America, CollegeWealth). If you contributed more than $4,000 per account during the taxable year, you may carry forward any undeducted amounts until the contribution has been fully deducted.

I don't think there are any other considerations. We've covered them all!

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