Virginia 529 contributions & taxes

[simpsongal]

I think we've got a few Virginia folks on here - I'm having trouble determining if you need to itemize your taxes to claim the 529 contribution deduction (you can deduct up to $4K per account, usually about a $250 benefit). 

I've checked the VA tax and 529 websites, they're very dodgy in the way they give the advice.  My tax experience this year tells me that you have to itemize to benefit from the 529 deduction.  We have two 529 accounts, that's about a $500 value for the $4K each we contribute each yr to those accounts.  This year, we were right on the line for std vs itemized, I found a few more charitable contributions that pushed us into itemized and incidentally bumped up our state refund by about $800....which seems to track w/the 529 contributions.

Anyone know/have thoughts?  I suspect we'll use the std deduction next year, so it would be very helpful to know whether we can claim the 529 contributions if we're filing std. (VA requires you to file std for state if you did so for federal and visa versa). 

ETA to adjust my numbers a little off - but it's looking like you do indeed need to itemize to claim it....sigh.

[Susie]

In NY I'm pretty sure it is not necessary to itemize to claim the deduction for 529 contributions (up to $10k for MFJ), but I don't have experience with any other states, sorry!

[jwright]

Itemizing versus taking the standard deduction is taken into account on your federal return. The 529 contributions only affect your state return, you can't take a 529 contribution as a deduction on your federal tax return at all. In my state and other nearby states where I've prepared returns, the 529 contributions are considered separately from other deductions at the state or federal level.

I don't practice in VA so I can't say for 100% certainty, but knowing how other states operate and reading this link www.virginia529.com/blog/529-plans-and-your-tax-return/ it sounds like you get to take $4,000 per person regardless of your federal itemized deductions.

Edited to Add:  I just looked at the Form 760 and itemized deductions are calculated on Virginia Schedule A and flow to Line 10 of Form 760 if you do not itemize you enter the standard deduction on Line 11 of Form 760.  Virginia529 is entered on Virginia Schedule ADJ as a deduction from income that flows to Line 13 of Form 760.  Then you add Lines 10,11,12 and 13 together.  So either way you are adding the 529 contributions to either your itemized or standard deduction.  At least that's who I'm reading the VA forms while I'm on hold with the IRS.

[simpsongal]

jwright, thank you for checking!! You did a way more thorough read on it than me

w/the relatively high std deduction and SALT cap from the TCJA, I figured this topic might affect quite a few people, I hope others benefited from the question

[jwright]

Apr 5, 2024 11:16:46 GMT -5 simpsongal said:

jwright , thank you for checking!! You did a way more thorough read on it than me

w/the relatively high std deduction and SALT cap from the TCJA, I figured this topic might affect quite a few people, I hope others benefited from the question

No problem!  It was a fun little distraction for me.  #taxnerd

[ssmjlm]

Turbo tax doesn’t even ask about 529 until you get to the state. Then in VA you put in your contributions.