Tax Benefits of West Virginia's 529 College Savings Plan
Rules for Claiming the Unlimited Tax Deduction
If you plan on paying for college tuition for a child or another dependent, you should have as much information as possible about the 529 college savings program in your state. This article includes an overview of West Virginia's plan and the tax benefits available to contributors.
What to Expect From West Virginia's College Savings Plan
What makes West Virginia's 529 plan different from the plans available in other states? First, residents who contribute to the state's 529 plan can deduct the entire amount of their contribution up to the extent of their income. Moreover, unused deductions may be carried forward for a maximum of five years.
Your child does not need to be heading to a traditional four-year university to benefit from the plan.
It can also "be used to finance higher education at vocational and technical schools, culinary schools, worker retraining classes, community colleges, and many others," according to the West Virginia State Treasurer's Office.
What the WV 529 Plan Tax Deduction Is Worth
West Virginia residents trying to decide whether to use a WV 529 plan versus another state's Section 529 plan needs to account for the potential tax savings of contributing to their in-state plan. In other words, will they be able to save more or less with West Virginia's plan than with another state's plan?
Considering that the top West Virginia income tax rate is 6.5 percent, each $1,000 contributed can save a taxpayer up to $65 at tax time. West Virginia does not currently offer a tax deduction to residents contributing to out-of-state plans or other types of college savings accounts such as a Coverdell Education Savings Account (ESA) or UTMA Custodial Account, which is the same case with several other states.
Consult with a tax advisor or a similar professional before signing up for a 529 plan. Make sure you have researched all of the options available to you and can, therefore, make the best decision for your family.
Claiming the Tax Deduction
Residents can claim the West Virginia 529 plan tax deduction on line 42 of their West Virginia Schedule M. The West Virginia deduction is an "above the line" income adjustment, meaning residents can claim it even if they do not itemize their other deductions (opting for the standard deduction). States such as New York are similar in this way. Also, there is no income phaseout on the WV 529 plan tax deduction.
Reference and Documentation
Additional information on the college savings plan tax deduction can be found on the West Virginia Department of Revenue website.