How long does a deposit have to sit in a DC 529 account to get the tax break?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Hi there DCUM, could use the hive mind here.

Here is my situation - DD is a rising senior. We are DC residents, and have emptied out our DC 529 account to pay for the first 3 years of college, and have savings accounts and I Bonds to pay for senior year.

Contributions to the DC 529 are deductible on our DC taxable income, up to $8,800 per year. If I cash out the IBonds, and then deposit those into a DC 529, is there a certain amount of time they have to sit in the account before they are deductible? Can I cash out the IBonds on September 1, deposit them into the DC529 account on September 2, and then use the DC529 to pay the tuition bill on September 3 and still get the tax break? Or do I have to let those funds sit in the account for a certain amount of time?

Thanks for your input!

You can deduct up to $8000 per year (for a married couple), not $8800.

While true, many people in 2 income DC households are better off filing Married Filing Separately on Same Return. In that case you can take only $4k in deductions (although you can carry forward unused deductions for a number of years. The delta between this filing and MFJ saves me and spouse many thousands annually.

We file as "Married Filing Separately". You can allocate $4000 to each spouse even filing that way. It's still $8000 for a couple.

2 things:

1. MFS will in almost every situation yield the highest tax liability as between the 3 married options under discussion. No way the deduction on the 4k makes it worthwhile
2. Ibid on the maintenance fee for emptying the DC account
3. IRS transfer limit is per beneficiary regardless of how many accounts they have

Actually 2 things:

1. Our software shows the difference in tax liability because we can toggle between MFJ and MFS for DC taxes (we MFJ for federal). It is always more tax due if we MFJ for DC taxes. I believe this has been identified as a common issue for dual earner households.

https://www.reddit.com/r/washingtondc/comments/1azmvo7/psa_taxes_if_married/

2. Two and Three were already addressed in previous post. It's worth $20 in annual maintenance fees for a $700 DC tax benefit.

Did you even read what you posted? It says Married Filing Separately on the Same return is better. Which is EXACTLY what I wrote. But if you elect that status you don't get $8k, just $4k. Which is what I wrote!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Hi there DCUM, could use the hive mind here.

Here is my situation - DD is a rising senior. We are DC residents, and have emptied out our DC 529 account to pay for the first 3 years of college, and have savings accounts and I Bonds to pay for senior year.

Contributions to the DC 529 are deductible on our DC taxable income, up to $8,800 per year. If I cash out the IBonds, and then deposit those into a DC 529, is there a certain amount of time they have to sit in the account before they are deductible? Can I cash out the IBonds on September 1, deposit them into the DC529 account on September 2, and then use the DC529 to pay the tuition bill on September 3 and still get the tax break? Or do I have to let those funds sit in the account for a certain amount of time?

Thanks for your input!

You can deduct up to $8000 per year (for a married couple), not $8800.

While true, many people in 2 income DC households are better off filing Married Filing Separately on Same Return. In that case you can take only $4k in deductions (although you can carry forward unused deductions for a number of years. The delta between this filing and MFJ saves me and spouse many thousands annually.

We file as "Married Filing Separately". You can allocate $4000 to each spouse even filing that way. It's still $8000 for a couple.

2 things:

1. MFS will in almost every situation yield the highest tax liability as between the 3 married options under discussion. No way the deduction on the 4k makes it worthwhile
2. Ibid on the maintenance fee for emptying the DC account
3. IRS transfer limit is per beneficiary regardless of how many accounts they have

Actually 2 things:

1. Our software shows the difference in tax liability because we can toggle between MFJ and MFS for DC taxes (we MFJ for federal). It is always more tax due if we MFJ for DC taxes. I believe this has been identified as a common issue for dual earner households.

https://www.reddit.com/r/washingtondc/comments/1azmvo7/psa_taxes_if_married/

2. Two and Three were already addressed in previous post. It's worth $20 in annual maintenance fees for a $700 DC tax benefit.

Did you even read what you posted? It says Married Filing Separately on the Same return is better. Which is EXACTLY what I wrote. But if you elect that status you don't get $8k, just $4k. Which is what I wrote!

I really don't understand why this is complicated. We have filed MFS on DC return for years, and every year do $8k in DC 529 deductions- each spouse gets allocated $4k.

Show me where it says that's not possible if you file MFS on your DC return

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Hi there DCUM, could use the hive mind here.

Here is my situation - DD is a rising senior. We are DC residents, and have emptied out our DC 529 account to pay for the first 3 years of college, and have savings accounts and I Bonds to pay for senior year.

Contributions to the DC 529 are deductible on our DC taxable income, up to $8,800 per year. If I cash out the IBonds, and then deposit those into a DC 529, is there a certain amount of time they have to sit in the account before they are deductible? Can I cash out the IBonds on September 1, deposit them into the DC529 account on September 2, and then use the DC529 to pay the tuition bill on September 3 and still get the tax break? Or do I have to let those funds sit in the account for a certain amount of time?

Thanks for your input!

You can deduct up to $8000 per year (for a married couple), not $8800.

While true, many people in 2 income DC households are better off filing Married Filing Separately on Same Return. In that case you can take only $4k in deductions (although you can carry forward unused deductions for a number of years. The delta between this filing and MFJ saves me and spouse many thousands annually.

We file as "Married Filing Separately". You can allocate $4000 to each spouse even filing that way. It's still $8000 for a couple.

2 things:

1. MFS will in almost every situation yield the highest tax liability as between the 3 married options under discussion. No way the deduction on the 4k makes it worthwhile
2. Ibid on the maintenance fee for emptying the DC account
3. IRS transfer limit is per beneficiary regardless of how many accounts they have

Actually 2 things:

1. Our software shows the difference in tax liability because we can toggle between MFJ and MFS for DC taxes (we MFJ for federal). It is always more tax due if we MFJ for DC taxes. I believe this has been identified as a common issue for dual earner households.

https://www.reddit.com/r/washingtondc/comments/1azmvo7/psa_taxes_if_married/

2. Two and Three were already addressed in previous post. It's worth $20 in annual maintenance fees for a $700 DC tax benefit.

Did you even read what you posted? It says Married Filing Separately on the Same return is better. Which is EXACTLY what I wrote. But if you elect that status you don't get $8k, just $4k. Which is what I wrote!

I really don't understand why this is complicated. We have filed MFS on DC return for years, and every year do $8k in DC 529 deductions- each spouse gets allocated $4k.

Show me where it says that's not possible if you file MFS on your DC return

And to be clear - each parent has our own 529 account- each one for one of the 2 kids.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Hi there DCUM, could use the hive mind here.

Here is my situation - DD is a rising senior. We are DC residents, and have emptied out our DC 529 account to pay for the first 3 years of college, and have savings accounts and I Bonds to pay for senior year.

Contributions to the DC 529 are deductible on our DC taxable income, up to $8,800 per year. If I cash out the IBonds, and then deposit those into a DC 529, is there a certain amount of time they have to sit in the account before they are deductible? Can I cash out the IBonds on September 1, deposit them into the DC529 account on September 2, and then use the DC529 to pay the tuition bill on September 3 and still get the tax break? Or do I have to let those funds sit in the account for a certain amount of time?

Thanks for your input!

You can deduct up to $8000 per year (for a married couple), not $8800.

While true, many people in 2 income DC households are better off filing Married Filing Separately on Same Return. In that case you can take only $4k in deductions (although you can carry forward unused deductions for a number of years. The delta between this filing and MFJ saves me and spouse many thousands annually.

We file as "Married Filing Separately". You can allocate $4000 to each spouse even filing that way. It's still $8000 for a couple.

2 things:

1. MFS will in almost every situation yield the highest tax liability as between the 3 married options under discussion. No way the deduction on the 4k makes it worthwhile
2. Ibid on the maintenance fee for emptying the DC account
3. IRS transfer limit is per beneficiary regardless of how many accounts they have

Actually 2 things:

1. Our software shows the difference in tax liability because we can toggle between MFJ and MFS for DC taxes (we MFJ for federal). It is always more tax due if we MFJ for DC taxes. I believe this has been identified as a common issue for dual earner households.

https://www.reddit.com/r/washingtondc/comments/1azmvo7/psa_taxes_if_married/

2. Two and Three were already addressed in previous post. It's worth $20 in annual maintenance fees for a $700 DC tax benefit.

Did you even read what you posted? It says Married Filing Separately on the Same return is better. Which is EXACTLY what I wrote. But if you elect that status you don't get $8k, just $4k. Which is what I wrote!

I really don't understand why this is complicated. We have filed MFS on DC return for years, and every year do $8k in DC 529 deductions- each spouse gets allocated $4k.

Show me where it says that's not possible if you file MFS on your DC return

Time to amend your prior returns my friend!

If you use TurboTax or any other software and file MFS it will ask you to allocate the allowable $4k between the filers.

Footnote 9 on FAQ. (bolded by me for emphasis)
DC taxpayers who contribute to the DC College Savings Plan can deduct up to $4,000 in Plan contributions from their federal adjusted gross income each year on their DC tax return (up to $8,000 for married couples or domestic partners filing jointly if both own accounts).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Hi there DCUM, could use the hive mind here.

Here is my situation - DD is a rising senior. We are DC residents, and have emptied out our DC 529 account to pay for the first 3 years of college, and have savings accounts and I Bonds to pay for senior year.

Contributions to the DC 529 are deductible on our DC taxable income, up to $8,800 per year. If I cash out the IBonds, and then deposit those into a DC 529, is there a certain amount of time they have to sit in the account before they are deductible? Can I cash out the IBonds on September 1, deposit them into the DC529 account on September 2, and then use the DC529 to pay the tuition bill on September 3 and still get the tax break? Or do I have to let those funds sit in the account for a certain amount of time?

Thanks for your input!

You can deduct up to $8000 per year (for a married couple), not $8800.

While true, many people in 2 income DC households are better off filing Married Filing Separately on Same Return. In that case you can take only $4k in deductions (although you can carry forward unused deductions for a number of years. The delta between this filing and MFJ saves me and spouse many thousands annually.

We file as "Married Filing Separately". You can allocate $4000 to each spouse even filing that way. It's still $8000 for a couple.

2 things:

1. MFS will in almost every situation yield the highest tax liability as between the 3 married options under discussion. No way the deduction on the 4k makes it worthwhile
2. Ibid on the maintenance fee for emptying the DC account
3. IRS transfer limit is per beneficiary regardless of how many accounts they have

Actually 2 things:

1. Our software shows the difference in tax liability because we can toggle between MFJ and MFS for DC taxes (we MFJ for federal). It is always more tax due if we MFJ for DC taxes. I believe this has been identified as a common issue for dual earner households.

https://www.reddit.com/r/washingtondc/comments/1azmvo7/psa_taxes_if_married/

2. Two and Three were already addressed in previous post. It's worth $20 in annual maintenance fees for a $700 DC tax benefit.

Did you even read what you posted? It says Married Filing Separately on the Same return is better. Which is EXACTLY what I wrote. But if you elect that status you don't get $8k, just $4k. Which is what I wrote!

I really don't understand why this is complicated. We have filed MFS on DC return for years, and every year do $8k in DC 529 deductions- each spouse gets allocated $4k.

Show me where it says that's not possible if you file MFS on your DC return

Time to amend your prior returns my friend!

If you use TurboTax or any other software and file MFS it will ask you to allocate the allowable $4k between the filers.

Footnote 9 on FAQ. (bolded by me for emphasis)
DC taxpayers who contribute to the DC College Savings Plan can deduct up to $4,000 in Plan contributions from their federal adjusted gross income each year on their DC tax return (up to $8,000 for married couples or domestic partners filing jointly if both own accounts).

Yes, and if you file as married filing separately, functionally that's filing as individuals, just on the same form. That's why you have to allocate deductions separately for each person, and they are taxed at different rates if they earn significantly different amounts. And therefore each spouse qualifies for the individual $4k deduction.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Hi there DCUM, could use the hive mind here.

Here is my situation - DD is a rising senior. We are DC residents, and have emptied out our DC 529 account to pay for the first 3 years of college, and have savings accounts and I Bonds to pay for senior year.

Contributions to the DC 529 are deductible on our DC taxable income, up to $8,800 per year. If I cash out the IBonds, and then deposit those into a DC 529, is there a certain amount of time they have to sit in the account before they are deductible? Can I cash out the IBonds on September 1, deposit them into the DC529 account on September 2, and then use the DC529 to pay the tuition bill on September 3 and still get the tax break? Or do I have to let those funds sit in the account for a certain amount of time?

Thanks for your input!

You can deduct up to $8000 per year (for a married couple), not $8800.

While true, many people in 2 income DC households are better off filing Married Filing Separately on Same Return. In that case you can take only $4k in deductions (although you can carry forward unused deductions for a number of years. The delta between this filing and MFJ saves me and spouse many thousands annually.

We file as "Married Filing Separately". You can allocate $4000 to each spouse even filing that way. It's still $8000 for a couple.

2 things:

1. MFS will in almost every situation yield the highest tax liability as between the 3 married options under discussion. No way the deduction on the 4k makes it worthwhile
2. Ibid on the maintenance fee for emptying the DC account
3. IRS transfer limit is per beneficiary regardless of how many accounts they have

Actually 2 things:

1. Our software shows the difference in tax liability because we can toggle between MFJ and MFS for DC taxes (we MFJ for federal). It is always more tax due if we MFJ for DC taxes. I believe this has been identified as a common issue for dual earner households.

https://www.reddit.com/r/washingtondc/comments/1azmvo7/psa_taxes_if_married/

2. Two and Three were already addressed in previous post. It's worth $20 in annual maintenance fees for a $700 DC tax benefit.

Did you even read what you posted? It says Married Filing Separately on the Same return is better. Which is EXACTLY what I wrote. But if you elect that status you don't get $8k, just $4k. Which is what I wrote!

I really don't understand why this is complicated. We have filed MFS on DC return for years, and every year do $8k in DC 529 deductions- each spouse gets allocated $4k.

Show me where it says that's not possible if you file MFS on your DC return

Time to amend your prior returns my friend!

If you use TurboTax or any other software and file MFS it will ask you to allocate the allowable $4k between the filers.

Footnote 9 on FAQ. (bolded by me for emphasis)
DC taxpayers who contribute to the DC College Savings Plan can deduct up to $4,000 in Plan contributions from their federal adjusted gross income each year on their DC tax return (up to $8,000 for married couples or domestic partners filing jointly if both own accounts).

Yes, and if you file as married filing separately, functionally that's filing as individuals, just on the same form. That's why you have to allocate deductions separately for each person, and they are taxed at different rates if they earn significantly different amounts. And therefore each spouse qualifies for the individual $4k deduction.

And again,to be clear, this is done using HR Block software.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Hi there DCUM, could use the hive mind here.

Here is my situation - DD is a rising senior. We are DC residents, and have emptied out our DC 529 account to pay for the first 3 years of college, and have savings accounts and I Bonds to pay for senior year.

Contributions to the DC 529 are deductible on our DC taxable income, up to $8,800 per year. If I cash out the IBonds, and then deposit those into a DC 529, is there a certain amount of time they have to sit in the account before they are deductible? Can I cash out the IBonds on September 1, deposit them into the DC529 account on September 2, and then use the DC529 to pay the tuition bill on September 3 and still get the tax break? Or do I have to let those funds sit in the account for a certain amount of time?

Thanks for your input!

You can deduct up to $8000 per year (for a married couple), not $8800.

While true, many people in 2 income DC households are better off filing Married Filing Separately on Same Return. In that case you can take only $4k in deductions (although you can carry forward unused deductions for a number of years. The delta between this filing and MFJ saves me and spouse many thousands annually.

We file as "Married Filing Separately". You can allocate $4000 to each spouse even filing that way. It's still $8000 for a couple.

2 things:

1. MFS will in almost every situation yield the highest tax liability as between the 3 married options under discussion. No way the deduction on the 4k makes it worthwhile
2. Ibid on the maintenance fee for emptying the DC account
3. IRS transfer limit is per beneficiary regardless of how many accounts they have

Actually 2 things:

1. Our software shows the difference in tax liability because we can toggle between MFJ and MFS for DC taxes (we MFJ for federal). It is always more tax due if we MFJ for DC taxes. I believe this has been identified as a common issue for dual earner households.

https://www.reddit.com/r/washingtondc/comments/1azmvo7/psa_taxes_if_married/

2. Two and Three were already addressed in previous post. It's worth $20 in annual maintenance fees for a $700 DC tax benefit.

Did you even read what you posted? It says Married Filing Separately on the Same return is better. Which is EXACTLY what I wrote. But if you elect that status you don't get $8k, just $4k. Which is what I wrote!

I really don't understand why this is complicated. We have filed MFS on DC return for years, and every year do $8k in DC 529 deductions- each spouse gets allocated $4k.

Show me where it says that's not possible if you file MFS on your DC return

Time to amend your prior returns my friend!

If you use TurboTax or any other software and file MFS it will ask you to allocate the allowable $4k between the filers.

Footnote 9 on FAQ. (bolded by me for emphasis)
DC taxpayers who contribute to the DC College Savings Plan can deduct up to $4,000 in Plan contributions from their federal adjusted gross income each year on their DC tax return (up to $8,000 for married couples or domestic partners filing jointly if both own accounts).

Yes, and if you file as married filing separately, functionally that's filing as individuals, just on the same form. That's why you have to allocate deductions separately for each person, and they are taxed at different rates if they earn significantly different amounts. And therefore each spouse qualifies for the individual $4k deduction.

And again,to be clear, this is done using HR Block software.

This discussion came up a few years ago here.

https://www.dcurbanmom.com/jforum/posts/list/1007340.page

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Hi there DCUM, could use the hive mind here.

Here is my situation - DD is a rising senior. We are DC residents, and have emptied out our DC 529 account to pay for the first 3 years of college, and have savings accounts and I Bonds to pay for senior year.

Contributions to the DC 529 are deductible on our DC taxable income, up to $8,800 per year. If I cash out the IBonds, and then deposit those into a DC 529, is there a certain amount of time they have to sit in the account before they are deductible? Can I cash out the IBonds on September 1, deposit them into the DC529 account on September 2, and then use the DC529 to pay the tuition bill on September 3 and still get the tax break? Or do I have to let those funds sit in the account for a certain amount of time?

Thanks for your input!

You can deduct up to $8000 per year (for a married couple), not $8800.

While true, many people in 2 income DC households are better off filing Married Filing Separately on Same Return. In that case you can take only $4k in deductions (although you can carry forward unused deductions for a number of years. The delta between this filing and MFJ saves me and spouse many thousands annually.

We file as "Married Filing Separately". You can allocate $4000 to each spouse even filing that way. It's still $8000 for a couple.

2 things:

1. MFS will in almost every situation yield the highest tax liability as between the 3 married options under discussion. No way the deduction on the 4k makes it worthwhile
2. Ibid on the maintenance fee for emptying the DC account
3. IRS transfer limit is per beneficiary regardless of how many accounts they have

Actually 2 things:

1. Our software shows the difference in tax liability because we can toggle between MFJ and MFS for DC taxes (we MFJ for federal). It is always more tax due if we MFJ for DC taxes. I believe this has been identified as a common issue for dual earner households.

https://www.reddit.com/r/washingtondc/comments/1azmvo7/psa_taxes_if_married/

2. Two and Three were already addressed in previous post. It's worth $20 in annual maintenance fees for a $700 DC tax benefit.

Did you even read what you posted? It says Married Filing Separately on the Same return is better. Which is EXACTLY what I wrote. But if you elect that status you don't get $8k, just $4k. Which is what I wrote!

I really don't understand why this is complicated. We have filed MFS on DC return for years, and every year do $8k in DC 529 deductions- each spouse gets allocated $4k.

Show me where it says that's not possible if you file MFS on your DC return

Time to amend your prior returns my friend!

If you use TurboTax or any other software and file MFS it will ask you to allocate the allowable $4k between the filers.

Footnote 9 on FAQ. (bolded by me for emphasis)
DC taxpayers who contribute to the DC College Savings Plan can deduct up to $4,000 in Plan contributions from their federal adjusted gross income each year on their DC tax return (up to $8,000 for married couples or domestic partners filing jointly if both own accounts).

LOL at the misguided confidence here.

+1 that Married filing separately on same return gets a married couple up to $8000 in deductions.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You get the deduction immediately. but if you roll-over within 2 years, the DC tax deduction is recaptured.

https://www.dccollegesavings.com/home/faqs.html#collapseare-there-any-special-tax-benefi

We do this every year- make a contribution, then a few weeks later, roll it over to our Vanguard 529. The money doesn't have to sit for any specified amount of time as long as THE ACCOUNT is more than 2 years old.

"If an account owner makes a non-qualified distribution or certain transfers or rollovers to another state’s program within 2 years of opening the account, the amount of the deduction may be "recaptured" and included in the account owner’s DC income."

That doesn't answer the most important question. Is OP's rollover one of these "certain transfers or rollovers to another state’s program" or not.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You get the deduction immediately. but if you roll-over within 2 years, the DC tax deduction is recaptured.

https://www.dccollegesavings.com/home/faqs.html#collapseare-there-any-special-tax-benefi

We do this every year- make a contribution, then a few weeks later, roll it over to our Vanguard 529. The money doesn't have to sit for any specified amount of time as long as THE ACCOUNT is more than 2 years old.

"If an account owner makes a non-qualified distribution or certain transfers or rollovers to another state’s program within 2 years of opening the account, the amount of the deduction may be "recaptured" and included in the account owner’s DC income."

That doesn't answer the most important question. Is OP's rollover one of these "certain transfers or rollovers to another state’s program" or not.

Good point! PP here who was talking about this as if it was a rollover, totally applied the wrong concept. OP isn't even talking about a rollover (which is where the 2 year account age requirement comes in). OP is talking about a qualified distribution. There do not appear to be any time limits/hold periods on that.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You get the deduction immediately. but if you roll-over within 2 years, the DC tax deduction is recaptured.

https://www.dccollegesavings.com/home/faqs.html#collapseare-there-any-special-tax-benefi

We do this every year- make a contribution, then a few weeks later, roll it over to our Vanguard 529. The money doesn't have to sit for any specified amount of time as long as THE ACCOUNT is more than 2 years old.

"If an account owner makes a non-qualified distribution or certain transfers or rollovers to another state’s program within 2 years of opening the account, the amount of the deduction may be "recaptured" and included in the account owner’s DC income."

That doesn't answer the most important question. Is OP's rollover one of these "certain transfers or rollovers to another state’s program" or not.

Good point! PP here who was talking about this as if it was a rollover, totally applied the wrong concept. OP isn't even talking about a rollover (which is where the 2 year account age requirement comes in). OP is talking about a qualified distribution. There do not appear to be any time limits/hold periods on that.

Oh, missed thst part too!

I was thinking of my situation, or I deposit and the tax deductible 529 and then roll it over to a better investment run by a different state.

But indeed OP is talking about spending their money almost immediately on qualified expenses.

In that case I would ask, Do you even need the 529 for a deduction, or can you apply a educational expense deduction directly?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You get the deduction immediately. but if you roll-over within 2 years, the DC tax deduction is recaptured.

https://www.dccollegesavings.com/home/faqs.html#collapseare-there-any-special-tax-benefi

We do this every year- make a contribution, then a few weeks later, roll it over to our Vanguard 529. The money doesn't have to sit for any specified amount of time as long as THE ACCOUNT is more than 2 years old.

"If an account owner makes a non-qualified distribution or certain transfers or rollovers to another state’s program within 2 years of opening the account, the amount of the deduction may be "recaptured" and included in the account owner’s DC income."

That doesn't answer the most important question. Is OP's rollover one of these "certain transfers or rollovers to another state’s program" or not.

Good point! PP here who was talking about this as if it was a rollover, totally applied the wrong concept. OP isn't even talking about a rollover (which is where the 2 year account age requirement comes in). OP is talking about a qualified distribution. There do not appear to be any time limits/hold periods on that.

Oh, missed thst part too!

I was thinking of my situation, or I deposit and the tax deductible 529 and then roll it over to a better investment run by a different state.

But indeed OP is talking about spending their money almost immediately on qualified expenses.

In that case I would ask, Do you even need the 529 for a deduction, or can you apply a educational expense deduction directly?

OP coming back in here....what a helpful thread. I do need the 529 for a deduction, because my income is too high to take an educational expense as a direct deduction.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You get the deduction immediately. but if you roll-over within 2 years, the DC tax deduction is recaptured.

https://www.dccollegesavings.com/home/faqs.html#collapseare-there-any-special-tax-benefi

We do this every year- make a contribution, then a few weeks later, roll it over to our Vanguard 529. The money doesn't have to sit for any specified amount of time as long as THE ACCOUNT is more than 2 years old.

"If an account owner makes a non-qualified distribution or certain transfers or rollovers to another state’s program within 2 years of opening the account, the amount of the deduction may be "recaptured" and included in the account owner’s DC income."

That doesn't answer the most important question. Is OP's rollover one of these "certain transfers or rollovers to another state’s program" or not.

Good point! PP here who was talking about this as if it was a rollover, totally applied the wrong concept. OP isn't even talking about a rollover (which is where the 2 year account age requirement comes in). OP is talking about a qualified distribution. There do not appear to be any time limits/hold periods on that.

Oh, missed thst part too!

I was thinking of my situation, or I deposit and the tax deductible 529 and then roll it over to a better investment run by a different state.

But indeed OP is talking about spending their money almost immediately on qualified expenses.

In that case I would ask, Do you even need the 529 for a deduction, or can you apply a educational expense deduction directly?

OP coming back in here....what a helpful thread. I do need the 529 for a deduction, because my income is too high to take an educational expense as a direct deduction.

My lord, tax policy is so incredibly stupid.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You get the deduction immediately. but if you roll-over within 2 years, the DC tax deduction is recaptured.

https://www.dccollegesavings.com/home/faqs.html#collapseare-there-any-special-tax-benefi

We do this every year- make a contribution, then a few weeks later, roll it over to our Vanguard 529. The money doesn't have to sit for any specified amount of time as long as THE ACCOUNT is more than 2 years old.

"If an account owner makes a non-qualified distribution or certain transfers or rollovers to another state’s program within 2 years of opening the account, the amount of the deduction may be "recaptured" and included in the account owner’s DC income."

That doesn't answer the most important question. Is OP's rollover one of these "certain transfers or rollovers to another state’s program" or not.

Good point! PP here who was talking about this as if it was a rollover, totally applied the wrong concept. OP isn't even talking about a rollover (which is where the 2 year account age requirement comes in). OP is talking about a qualified distribution. There do not appear to be any time limits/hold periods on that.

Oh, missed thst part too!

I was thinking of my situation, or I deposit and the tax deductible 529 and then roll it over to a better investment run by a different state.

But indeed OP is talking about spending their money almost immediately on qualified expenses.

In that case I would ask, Do you even need the 529 for a deduction, or can you apply a educational expense deduction directly?

OP coming back in here....what a helpful thread. I do need the 529 for a deduction, because my income is too high to take an educational expense as a direct deduction.

My lord, tax policy is so incredibly stupid.

It really is insane the crazy structures we come up with to not just have the government pay for public goods. One of our funny running jokes when we were overseas a couple of years ago was asking college students how much their tuition was, and then blowing their minds by telling them how much it is in the US.