VA taxes / 529 accounts - moving between funds tax question

[Anonymous]

Ok, so my spouse and I each have 529 accounts for each of our kids. This year, mid-year after making some initial contributions, we moved our 529 money into different funds to reflect appropriate age-based risk. The money is still with Va529 and we weren’t trying to create new accounts or anything - I think the transaction on our statement refers to “investment direction” - but they assigned us new account numbers. I’m doing my taxes, and I’ve entered all of the account numbers when prompted because contributions were made both before and after we moved things. Turbo tax is treating each account number as a genuinely separate account, which seems wrong (VA bases deductions partially on the number of accounts held and it gives a big boost in our deductions). Can someone point me to the rule for how to deal with this? I don’t think it’s properly considered a rollover if it’s all still with the same fund manager. Im confused.

[Anonymous]

I don't know and I've wondered this myself, but wouldn't the only implication be timing of the deduction? With unlimited carryforward, you can deduct it all eventually anyway.

You're not counting the money you moved as another contribution, are you?

[Anonymous]

I think I’m getting closer to my answer. I, as a parent, can’t claim a deduction for more than one account for any given child in the same portfolio (VA529 website). I assume I can claim the amount contributed that is traceable to the most recently assigned account number, but treat it as a single account for purposes of deduction.

[Anonymous]

You can claim $4k per account in Virginia. Maybe I am not understanding the question but I always just put in the account number and amount donated. If I changed investment direction and made a $2K contribution pre-investment direction change to one account number and $3k post-change to another, I report $2K to the first account number and $3k to the second.

[Anonymous]

Anonymous wrote:You can claim $4k per account in Virginia. Maybe I am not understanding the question but I always just put in the account number and amount donated. If I changed investment direction and made a $2K contribution pre-investment direction change to one account number and $3k post-change to another, I report $2K to the first account number and $3k to the second.

But this theoretically doubles the amount of deduction you can claim that year (at least in Virginia). If this were allowed, wouldn’t everyone just change investment direction mid-year every year and contribute 4k on the front end and 4k on the back end?

[Anonymous]

Anonymous wrote:

Anonymous wrote:You can claim $4k per account in Virginia. Maybe I am not understanding the question but I always just put in the account number and amount donated. If I changed investment direction and made a $2K contribution pre-investment direction change to one account number and $3k post-change to another, I report $2K to the first account number and $3k to the second.

But this theoretically doubles the amount of deduction you can claim that year (at least in Virginia). If this were allowed, wouldn’t everyone just change investment direction mid-year every year and contribute 4k on the front end and 4k on the back end?

If you didn't move the money, you could absolutely deduct $5000 in this person's example. OP, are you concerned about deducting more than $4000 per owner/beneficiary (which you absolutely can deduct $8k if you contribute $4k to total stock market and $4k to aggressive for the same owner/beneficiary because those are different investment options)?

Or are you specifically concerned that owner/beneficiary/investment option is determined as of December 31st vs. as of the contribution date? I haven't ever changed investment options, but do have multiple accounts for the same parent/child and would feel comfortable doing like the PP and deducting $5k if I'd originally contributed less than $4k to each. Worst case, you're taking the deduction a year early.

[Anonymous]

I'm the PP but there are something like 25+ investment options if you include the managed ones. Ignoring any gift tax or asset allocation considerations, but you could put $4k in each investment option for each parent/kid and deduct Mom/kid 25*$4k and Dad/kid 25*$4k for each kid. Of course you'd also have to be rich....

[Anonymous]

This is the first time I’ve changed investment direction, so this surprised me. Further reading convinces me that the new account number is very deliberately spawning a new and separate account that can be reported as such.

[Anonymous]

Anonymous wrote:You can claim $4k per account in Virginia. Maybe I am not understanding the question but I always just put in the account number and amount donated. If I changed investment direction and made a $2K contribution pre-investment direction change to one account number and $3k post-change to another, I report $2K to the first account number and $3k to the second.

This is what I do. Been doing it for 10+ years, never had a problem.

[Anonymous]

Your question is not clear, but:

1- There is no practical limit on the amount of 529 contributions you can deduct in VA, since each parent/child/investment option is a separate "account" and you can deduct $4K per account.

2- Are you asking if you contribute $X to investment option 1 and then later move it to investment option 2 can you deduct 2*X that year? The answer is surely "no" but I don't have time to hunt down the applicable rule.

[Anonymous]

Sorry I wasn’t clear! In my example, I contribute $4k to an account in January. I realize my kid is getting older so in June i move all of the funds from that account into a portfolio considered risk-appropriate for his age. In November I realize I have some extra cash and I decide to make another $4k contribution into this lower-risk account. In my mind, it’s basically the same account, but technically it is in a new portfolio and has a new account number. From what everyone’s telling me, I should separately list each of these accounts, and both of my $4k contributions will be eligible for deduction because they were made to different accounts.

[Anonymous]

Anonymous wrote:Sorry I wasn’t clear! In my example, I contribute $4k to an account in January. I realize my kid is getting older so in June i move all of the funds from that account into a portfolio considered risk-appropriate for his age. In November I realize I have some extra cash and I decide to make another $4k contribution into this lower-risk account. In my mind, it’s basically the same account, but technically it is in a new portfolio and has a new account number. From what everyone’s telling me, I should separately list each of these accounts, and both of my $4k contributions will be eligible for deduction because they were made to different accounts.

I am one of the PPs who did this and never had an issue since the contribution limit is per account. From what I recall you just list the account number and amount contributed. It doesn’t ask for dates of the contribution or account balance.