Starting a 529 - DC or ...?

[Anonymous]

I'm starting a 529 account for my infant son. We can put in the $8000 that would be tax deductible this year (in DC). The tax deduction looks like it would save us about $480 this year. I know the DC plan was recently improved to have a different investment manager and lower fees. But some states still seem to have lower fees.

I was looking at this map from Vanguard of states that offer Vanguard investment options and noticed Vanguard is also the investment manager for some states: https://personal.vanguard.com/us/whatweoffer/college/finda529Popup.jsf

Does anyone living in DC have advice regarding going with a different plan than DC's?

[Anonymous]

you can always put the money into the dc plan to get the tax benefit and then transfer the balance to another one like Utah.

[Anonymous]

Anonymous wrote:you can always put the money into the dc plan to get the tax benefit and then transfer the balance to another one like Utah.

They will most likely recapture the state tax deduction when the plan reports the transfer to the IRS. VA recaptures deductions if transferred to another plan.

[Anonymous]

Look at co. I know little about it personally but a sibling put as much in the first year as two other siblings in our family did and by far this has grown the most. I know it’s true bc I’ve seen the statement. I don’t know how it was invested or if options changed tho since it was opened.

[Anonymous]

A higher quality plan will likely do better than the tax deduction with a not so good plan, especially if there are fees. many of the Vanguard plans are very very low cost, we have Utah and Nevada.

[Anonymous]

Anonymous wrote:

Anonymous wrote:you can always put the money into the dc plan to get the tax benefit and then transfer the balance to another one like Utah.

They will most likely recapture the state tax deduction when the plan reports the transfer to the IRS. VA recaptures deductions if transferred to another plan.

Oh really ? I talked to Maryland 529 rep at a fair yesterday and she told me we could do that (do the MD 529 for one year for the tax deduction and then roll into California or NY plan if we wanted to). Is it illegal ?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:you can always put the money into the dc plan to get the tax benefit and then transfer the balance to another one like Utah.

They will most likely recapture the state tax deduction when the plan reports the transfer to the IRS. VA recaptures deductions if transferred to another plan.

Oh really ? I talked to Maryland 529 rep at a fair yesterday and she told me we could do that (do the MD 529 for one year for the tax deduction and then roll into California or NY plan if we wanted to). Is it illegal ?

It's not illegal, but some states recapture the tax benefits if you transfer funds out of the state plan, because participating in the state's plan is a requirement of receiving the tax benefit. In some states, you just need to contribute there and can then move the money. In others, the money must remain in the state plan. Check your state requirements--it's usually spelled out pretty clearly.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:you can always put the money into the dc plan to get the tax benefit and then transfer the balance to another one like Utah.

They will most likely recapture the state tax deduction when the plan reports the transfer to the IRS. VA recaptures deductions if transferred to another plan.

Oh really ? I talked to Maryland 529 rep at a fair yesterday and she told me we could do that (do the MD 529 for one year for the tax deduction and then roll into California or NY plan if we wanted to). Is it illegal ?

It's not illegal, but some states recapture the tax benefits if you transfer funds out of the state plan, because participating in the state's plan is a requirement of receiving the tax benefit. In some states, you just need to contribute there and can then move the money. In others, the money must remain in the state plan. Check your state requirements--it's usually spelled out pretty clearly.

There’s a waiting period in DC’s plan.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:you can always put the money into the dc plan to get the tax benefit and then transfer the balance to another one like Utah.

They will most likely recapture the state tax deduction when the plan reports the transfer to the IRS. VA recaptures deductions if transferred to another plan.

Oh really ? I talked to Maryland 529 rep at a fair yesterday and she told me we could do that (do the MD 529 for one year for the tax deduction and then roll into California or NY plan if we wanted to). Is it illegal ?

It's not illegal, but some states recapture the tax benefits if you transfer funds out of the state plan, because participating in the state's plan is a requirement of receiving the tax benefit. In some states, you just need to contribute there and can then move the money. In others, the money must remain in the state plan. Check your state requirements--it's usually spelled out pretty clearly.

For Virginia it looks like they recapture the taxes. See https://www.bogleheads.org/wiki/529_plan_recapture_tax_on_rollovers

From the plan brochure:
Rollover Distributions
• Funds can be rolled over from a Virginia529 account to another state’s 529 plan or a Qualified ABLE Program once every rolling 12 months for the same Beneficiary.
• Virginia taxpayers must recapture any previously claimed state income tax deduction for funds rolled over to another state’s 529 plan.

and description:
The principal portion of rollovers and nonqualified withdrawals from this plan are included in Virginia taxable income to the extent of prior Virginia tax deductions. Nonqualified withdrawals for this purpose do not include withdrawals made as the result of the beneficiary's death or disability or withdrawals made on account of the beneficiary's receipt of a scholarship.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:you can always put the money into the dc plan to get the tax benefit and then transfer the balance to another one like Utah.

They will most likely recapture the state tax deduction when the plan reports the transfer to the IRS. VA recaptures deductions if transferred to another plan.

Oh really ? I talked to Maryland 529 rep at a fair yesterday and she told me we could do that (do the MD 529 for one year for the tax deduction and then roll into California or NY plan if we wanted to). Is it illegal ?

It's not illegal, but some states recapture the tax benefits if you transfer funds out of the state plan, because participating in the state's plan is a requirement of receiving the tax benefit. In some states, you just need to contribute there and can then move the money. In others, the money must remain in the state plan. Check your state requirements--it's usually spelled out pretty clearly.

There’s a waiting period in DC’s plan.

It's 2 years in DC. So to get the tax deduction, you would open/contribute to DC and in 2 years could transfer that contribution to another plan if you wanted. That said I think the DC plan is pretty good - fees aren't crazy and it has some good low cost index fund options, so I don't see us transferring to another plan.