The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: dave__ on November 03, 2015, 04:20:11 PM
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According to this site, both states offer tax incentives for putting money into 529 accounts. Could we put money into both and reap both state tax benefits?
http://www.savingforcollege.com/compare_529_plans/?plan_question_ids%5B%5D=437&page=compare_plan_questions
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529 incentives are completely state based. If you earned income in both states, you could put a total of $10k in per person ($5k in each state plan), and claim the $5k deduction in each state against that state's income. If you did not earn income in both states, this wouldn't work.
I don't know how it works for other states, but in NY, you can only claim 529 deductions that go through the state savings plan.
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Each state allows up to $20k per year ($10k per person) - could we *really* put $40k into 529s and get a huge tax deduction?
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Each state allows up to $20k per year ($10k per person) - could we *really* put $40k into 529s and get a huge tax deduction?
If you are paying income taxes in each state and each state grants a tax deduction for 529 contributions regardless of whether you are a resident or nonresident, then I would give a tentative, qualified answer of yes.
I'm not sure how it would play out, however. For example, I pay income taxes in two states. In my home state I can already deduct income that was taxed in the state I work in. Thus if I receive a deduction from the state I work in, that means I pay less taxes to that state and therefore owe more to the state I live in, making it kind of a wash. The only real difference it makes is which state gets the tax money.