529
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Anonymous
| Are you allowed to pull from a 529 for private school? I haven't done this yet and thinking it would be smart for the tax break, right? Does anyone do this? Thanks! |
Anonymous
| yes. google is your friend. |
Anonymous
| Yes. $10,000 per year per kid. |
Anonymous
| Up to $10k/year |
Anonymous
| I’m not following what the tax break is here…I think for DC residents, the max 529 tax deduction for a couple is $8k. So I’m not quite following how this would help your taxes? Unless you already have college saved for, and you’re saying you’d contribute solely to pull the money out for private school? |
Anonymous
| You are not sure how a tax deduction will help your taxes?! |
Anonymous
+1, I have never thought it was worth it. In Virginia you can deduct $4k per account holder per student which in our household amounts to $8k. We actually don't contribute that much annually to the college fund, so washing private K-8 tuition through the 529 would increase our state deduction a bit ... but jeez, it's a lot of extra transactions and paperwork, for not a lot of benefit. We already get a refund on state taxes without doing this. Maybe it makes sense if you have several kids in private school and also aren't funding their 529s very much? |
Anonymous
No, I wasn’t saying that at all. Assuming this person already contributes to the 529 for future college expenses, with the max deduction in dc being $8k for annual 529 contributions, I’m just not sure it would give you much of a tax break—unless you’re putting in well below $8k as is? Also, sorry but an $8k tax deduction saves you like $600 on your taxes. It’s not a tax credit. |
Anonymous
| I was thinking that since we have a lot in 529, we could pull 30k (10 per kid) then contribute that same amount immediate and deduct it from taxes - wouldn’t that work? |
Anonymous
| Not worth the hassle. At $10K per year allowed, you are only getting a tax deduction based on any return made on that $10K. So assuming you made a 10% return, that is $1000 that you are allowed to deduct. That would be approximately $250 in a 25% tax bracket. A lot of paperwork and forms for $250, and if you just let that money stay in the account and make more gains to be used for college, you are better off. |
Anonymous
| I thought you got to deduct whatever you put in from your salary - so if you put in 30K then you can deduct 30K from your salary - is that not the case? Now I am really confused! |
Anonymous
There’s a limit - in Virginia, it’s $4000 per year per 529 account that can be deducted from your taxable income. Any amount over that can be carried forward to the next tax year(s), but you wouldn’t be able to deduct all $30k in one year. |
Anonymous
| If you super fund the 529 the year the child is born then the tax free growth makes it worth it. |
Anonymous
Yes that would work. It helps increase your cost basis. In the event you ever make non-qualified withdrawals, you would owe less taxes because a smaller portion of your balance is gains. |
Anonymous
The point about cost basis is true (tho not an event I'd move mountains to plan for) but the earlier point about deducting 10k per kid depends on what your state law allows. |