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Started By
Message
LA START 529 Tax Deductions
Posted on 12/7/18 at 9:25 am
Posted on 12/7/18 at 9:25 am
Hi, y'all!
I am confusing myself on the 529 plan. We have a son that will still be under one come January. I want to open a 529 for him the first week of January and start contributing at least $4,800 a year.
In order to deduct the $4,800 as a married couple filing jointly, do we both need to open a 529 account for him?
Can we just open one account, contribute $4,800, and each claim the $2,400 deduction for a total of $4,800?
I am confusing myself on the 529 plan. We have a son that will still be under one come January. I want to open a 529 for him the first week of January and start contributing at least $4,800 a year.
In order to deduct the $4,800 as a married couple filing jointly, do we both need to open a 529 account for him?
Can we just open one account, contribute $4,800, and each claim the $2,400 deduction for a total of $4,800?
quote:
s. Married couples filing jointly may deduct deposits to START accounts from Louisiana State Taxable Income up to a maximum of $4,800 per year, per beneficiary, and any unused portion may be carried forward to subsequent tax years.
This post was edited on 12/7/18 at 9:34 am
4
Posted on 12/7/18 at 9:49 am to TheWiz
No need to open two -- you can both contribute to the same 529.
Posted on 12/7/18 at 9:54 am to redstickrun
quote:
No need to open two -- you can both contribute to the same 529.
That's what I thought. I read something that made it sound like the account holder could only deduct the $2,400 per child, so it almost sounded like we each needed an account.
Much simpler to have one account, one monthly deduction, and we each get the $2,400 credit when we file our taxes together.
Posted on 12/7/18 at 10:18 am to TheWiz
I am going through this as we speak. I can't provide definitive information on splitting it up between you and your wife but based on how I submitted the application, it would seem feasible that you could. I just don't know that it makes sense to do that unless you know for sure you'll be putting more than $4800/yr in. Your other option could be to have your family or her family open a separate account for him and you contribute money there as well. Keep in mind, I've read that there are some downfalls to having someone else own an account for him because it makes it harder to manage if your son doesn't go to college. So, maybe the best route is to just contribute up to $4800.
FWIW, one thing that I keep getting hung up on is the commitment to college. I truly hope my daughter and 2nd child, when he/she comes along, goes to college but in the event neither of them do, you will forfeit all the capital gains/state contributions you make per year from your investment and you are federally taxed 10% on the remaining principal you have invested. I do wonder if investing in a mutual fund or some other aggressive investments early on will be a safer alternative incase they don't go to college.
So, using your $4800/yr example, if my math is generally correct with an average of 8% return over 18 years, you're forfeiting almost 7K back to the state and are federally taxed at 10% on principal of 86K investment for $8600. Ultimately, you're losing almost 16K on this decision.
FWIW, one thing that I keep getting hung up on is the commitment to college. I truly hope my daughter and 2nd child, when he/she comes along, goes to college but in the event neither of them do, you will forfeit all the capital gains/state contributions you make per year from your investment and you are federally taxed 10% on the remaining principal you have invested. I do wonder if investing in a mutual fund or some other aggressive investments early on will be a safer alternative incase they don't go to college.
So, using your $4800/yr example, if my math is generally correct with an average of 8% return over 18 years, you're forfeiting almost 7K back to the state and are federally taxed at 10% on principal of 86K investment for $8600. Ultimately, you're losing almost 16K on this decision.
Posted on 12/7/18 at 10:46 am to cberni1
There are lots of options to use that 529 if your kid doesn't go to college. Can change the kid (either your next child or a relative), and now can use it to pay for private school tuition.
529 plans also cover votech schools, so that's an option. and there is no deadline - kid can go later and life and still use the plan.
The loss of flexibility is why it is generally advised that you max out more flexible tax advantaged savings options (e.g. Roth IRA) first.
529 plans also cover votech schools, so that's an option. and there is no deadline - kid can go later and life and still use the plan.
The loss of flexibility is why it is generally advised that you max out more flexible tax advantaged savings options (e.g. Roth IRA) first.
Posted on 12/7/18 at 12:06 pm to lsujro
Can 529 funds go to private school- middle school and high school? For some reason, I thought that some states legislated this option, but Louisiana did not.
Posted on 12/7/18 at 12:55 pm to Tiger1414
quote:
Can 529 funds go to private school- middle school and high school?
LA did make this change but i think for new accounts only. if you have an older one, you have to start a new one to get the benefit iirc. should be on the lastart website.
Posted on 12/7/18 at 2:26 pm to cberni1
quote:
you will forfeit all the capital gains/state contributions you make per year from your investment and you are federally taxed 10% on the remaining principal you have invested
That isn't correct. You pay 10% penalty and taxes on the earnings. The principal is post-tax money and is not subject to a penalty or taxes.
Posted on 12/7/18 at 4:25 pm to cberni1
quote:
So, using your $4800/yr example, if my math is generally correct with an average of 8% return over 18 years, you're forfeiting almost 7K back to the state and are federally taxed at 10% on principal of 86K investment for $8600. Ultimately, you're losing almost 16K on this decision.
This is just so wrong.
Posted on 12/8/18 at 10:51 am to TheWiz
My financial advisor says you have to have two accounts. I never checked on this, but that's what he told me.
While I have a 529 for my kids, my 'earnings enhancement' is very small (2%) from the state because I'm not poor. A sweet situation is getting a grandparent of a child who is retired but not poor to set up an account. They're not working so their reported adjusted gross income is probably much lower and they qualify for a much higher 'earnings enhancement' (probably >10%).
While I have a 529 for my kids, my 'earnings enhancement' is very small (2%) from the state because I'm not poor. A sweet situation is getting a grandparent of a child who is retired but not poor to set up an account. They're not working so their reported adjusted gross income is probably much lower and they qualify for a much higher 'earnings enhancement' (probably >10%).
Posted on 12/8/18 at 12:19 pm to RoyalWe
A buddy I work with swears you have to each have your own account. To me that sounds bizarre. I would think you can only claim $4800 per kid when preparing taxes as MFJ. He seems to think they can each claim $9600 for the two kids. It's all one tax return though, right? That seems like double dipping.
Same situation.
The grandparent thing doesn't work for us. My parents each own their own business. I doubt they retire soon. Her dad is an international pilot for FedEx. I think he is forced to retire in 3-4 years. Her stepfather owns a business which I assume does about $150mm in revenue.
quote:
my 'earnings enhancement' is very small (2%) from the state because I'm not poor
Same situation.
The grandparent thing doesn't work for us. My parents each own their own business. I doubt they retire soon. Her dad is an international pilot for FedEx. I think he is forced to retire in 3-4 years. Her stepfather owns a business which I assume does about $150mm in revenue.
Posted on 12/8/18 at 5:15 pm to TheWiz
Each parent can claim $2400 per kid. So for a 2 kid household it's $9600 filing jointly. If they're filing separately, then they file $4800 on each of their separate returns.
Posted on 12/10/18 at 8:58 am to RoyalWe
Yeah. He made it sound like they were each opening their own account for each child and would claim $9,600 each. I was perplexed.
Posted on 12/10/18 at 10:43 am to TheWiz
Open one account per child. You and your wife can both contribute to the same account and take the deduction of $4800 on the joint return.
Posted on 12/10/18 at 12:54 pm to LSUFanHouston
Grassy arse. That is what we planned to do and what made the most sense.
I think my friend thinks is trying to overthink it.
I think my friend thinks is trying to overthink it.
This post was edited on 12/10/18 at 12:55 pm
Posted on 12/11/18 at 1:20 pm to TheWiz
Has anyone made the K-12 withdrawal for private school tuition? This was the first year that was available.
Also, you can contribute more than $4800 per child, MFJ. It's just the deduction is limited to $4800 per child.
Also, you can contribute more than $4800 per child, MFJ. It's just the deduction is limited to $4800 per child.
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