Tax Benefits of West Virginia's 529 College Savings Plan
Rules for Claiming the Unlimited Tax Deduction
If you're a West Virginia resident who plans on paying for college tuition for a child or another loved one, you should have as much information as possible about the 529 college savings program in your state.
The information that follows includes an overview of West Virginia's plan, the tax benefits available to contributors and more. While families commonly rely on loans and financial aid to fund a college tuition for their children, savings plans are one of the key strategies available to foot the bill for college as well.
That's why it's important to start the process early--before your child is walking across the stage of their high school auditorium and it's far too late to save.
What to Expect From West Virginia's College Savings Plan
What makes West Virginia's 529 plan stand out from the plans available in other states? For starters, residents who contribute to the state's 529 plan can deduct the entire amount of their contribution, up to the extent of their income. That nearly puts West Virginia in a league of its own when it comes to 529 plans. It is one of four states in the country that allow unlimited deductions for its college savings plan. Moreover, unused deductions may be carried forward for a maximum of five years.
Your child doesn't 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 Worth
West Virginia residents trying to decide whether to use a WV 529 plan versus another state's Section 529 plan need 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?
Considering that the top West Virginia income tax rate is 6.50 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.
Whether or not you think you understand the benefits of West Virginia's college savings program, it's important to consult with a tax advisor or a similar professional before signing up. Make sure you've researched all of the options available to you and can, therefore, make the best decision for your family as far as savings for college is concerned.
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.