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!
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!
It depends on if your state has a deduction for these type of contributions. There is no federal deduction. What state are inquiring about?
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!
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.
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!
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.
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.
Ah, sorry. Hope one of the Intuit folks can answer this. I’d love to know for next year. Good luck!
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!
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....
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.