Side gig income going to a college 529 plan

[Cloudy2]

Dear Turbo tax team, 

About 100 % of  my side gig income earned in 2022 will be transferred onto a college 529 plan

for my son.  Would this amount still be considered taxable by the IRS?  Please advise

[AnthonyC_CPA]

Hi Cloudy2,

  Thanks for reaching out to Intuit's TurboTax Ask the Expert's Day!  It is wonderful that you are investing money into a 529 account for your child.  Unfortunately this income would be taxable at the federal level.  There is no federal deduction for investing in 529 accounts.  However certain states do have a state tax deduction so it is important to see if that pertains to your situation.  Although you have to pay taxes this year on the income earned be aware that if you use the money in the 529 account for qualifying education costs the full amount withdraw is tax-free.  This means that you would not have to pay tax on the appreciation on your investment.

Hope this helps!  Thank you and have a great day!

AnthonyC, CPA