If married filing separately on same return in DC, are you limited to a total deduction of $4,000 for 529 contributions (ie not $8,000)?

[BD111]

My wife and I both live in DC and each contributed $4,000 to separate 529 plans for our child (i.e., a total household contribution of $8,000).  We're filing as "married filing separately on the same return," as that seems to give us the lowest overall state tax.  It looks like Turbo Tax is limiting us to a total of $4,000 in 529 contribution deductions, not $8,000.  I know that if married filing jointly, we could deduct a total of $8,000 in 529 contributions (but it overall doesn't make sense to change the filing status).  I gather for some reason that doesn't apply to married filing separately on the same return?  I'd appreciate if anyone has a good explanation for this, as we might change our 529 contributions going forward.  Thanks!

[BD111]

This worked perfectly, thanks!

[mcspence1981]

Hi, I don't see a reply here to your original question, but I have the same problem. Setting up a 529 for our new child and planning for 2020 taxes. How did you handle deducting the full $8,000? 

Thanks!

[CatinaT1]

It depends on if your state has a deduction for these type of contributions.  There is no federal deduction.  What state are inquiring about?

[mcspence19]

Hi @CatinaT1, sorry for the different username. Somehow it's no longer allowing me to post from the same one I did a couple of weeks ago. We are in DC and want to make a max contribution to the DC College Savings Plan 529, but we file separately on a joint return like the original poster (a quirk of DC tax law, I understand, rather than jointly). My question is whether my wife and I each need to set up a separate 529 to make the max $4000 contribution this year or if we can open a single 529 and contribute the full $8000 to take advantage of this year's deduction. Thank you!

[CatinaT1]

If you are filing separately you have a max of $4,000, but can carry over your contributions for up to five years.  If you filed separate on a combined return, you will both get the $4,000. 

According to the Instructions published by the DC Dept of Revenue:

You may deduct up to $4,000 annually for contributions you made to all qualified college savings accounts of which you are the owner. If you are married and file a joint or combined separate return, each spouse/registered domestic partner may deduct up to $4,000 for contributions made to all accounts for which that spouse/registered domestic partner is the sole owner.  Contributions made to one or more accounts in excess of the allowable $4,000 ($8,000 for eligible joint filers) annual deduction may be carried forward as a deduction (subject to the annual limitation) for up to five years.

https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/2019%20D-40_Booklet....

[mills014]

What was the solution to this problem? I see that the OP references something 'worked perfectly,' but I don't see a post that is stating what the solution is.  We have the same problem, two separate $4000 contributions for each spouse, but turbo tax only seems to be deducting $4000 (filing DC taxes as married filing separately on same return).  Thanks!

[mcspence19]

Not sure how it actually works in TurboTax, but we confirmed with a DC tax professional that we did it wrong. Need to set up accounts in each of your names and deposit $4k separately in each one to take advantage of the full $8k deduction per couple. As it is, I’ll have to carry over $4k of my deduction to my 2021 taxes.

[mills014]

Thanks!  Appreciate it!!  We’re good to go on the two accounts and know all $8000 can be deducted as a result. Just wondering how to ensure Turbo Tax  includes it correctly. It has in the past but this year it seems to only deducting $4000 even when I enter $8000. It doesn’t ask me for my contribution abs my wife’s contribution separately which seems odd since that would be important information. 

[mcspence19]

Ah, sorry. Hope one of the Intuit folks can answer this. I’d love to know for next year. Good luck!

[AJBinDC]

Yes this is definitely a glitch in the TurboTax system. But you can fix it by going to Forms --> Schedule S (under District of Columbia forms) and entering 4,000 for each spouse in the Subtractions Smart Worksheet. You would also need to make sure that Line 6 on Schedule I shows 8,000. Hope that helps!

[rfs13]

I hope Intuit does finally address this glitch.  We're also married filing separately (common for DC taxes); also contributed $4K each to a child's 529 plan; and are also not receiving the full benefit.  Oddly, we're showing zero reduction in taxable income from the first $4000 we enter (no matter how it's allocated between us), but then full benefit for the second half of the contribution (above $4000, up to $8000, again however it's allocated).  And:  we tried the fix suggested above by AJbinDC in 2021 -- to go into "Forms" and make sure that it's $4K each on Schedule S, and $8K on line 6 of Schedule I -- and it doesn't help.  Please, advice, anyone?  Or better:  Intuit, please address this?!  Thanks....

[DaveF1006]

It depends on how you filed your DC returns. According to the Instructions published by the DC Dept of Revenue:

If you are filing separately you have a max of $4,000, but can carry over your contributions for up to five years.  If you filed separate on a combined return, you will both get the $4,000

If you are married and file a joint or combined separate return, each spouse/registered domestic partner may deduct up to $4,000 for contributions made to all accounts for which that spouse/registered domestic partner is the sole owner.  

Contributions made to one or more accounts in excess of the allowable $4,000 ($8,000 for eligible joint filers) annual deduction may be carried forward as a deduction (subject to the annual limitation) for up to five years.

@rfs13