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

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

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]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![/quote]

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

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.[/quote]

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

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