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You’ve made it through the first month of the New Year. As January comes to an end, it’s time to start collecting all the documents you’ll need to prepare your federal, state, and local income tax filings. If you’ve been saving for college in a CollegeAdvantage 529 plan and enjoying its tax benefits, you will be receiving some records from us soon.
Here’s what to look for:
Annual Tax Documents
Any account owner, who made a withdrawal from a CollegeAdvantage Direct 529 plan to cover qualified higher education expenses in 2016, will receive a federal form 1099-Q. This form will report the total distributions, earnings, and basis (also known as principal) for tax reporting purposes. Depending on the preferences you selected when setting up your 529 account, the 1099-Q will either be sent through U.S. Postal Service or email. You can also find this form online. After you’ve logged into your account, on the left side of the account page, select “view profile and documents.” After that link redirects you, select “Statement, confirm & tax forms,” to look at the available tax information.
If you also own accounts in the CollegeAdvantage Guaranteed 529 Plan and/or the BlackRock CollegeAdvantage Advisor 529 Plan, you will be mailed separate forms from those accounts if you made withdrawals.
Contribution Records for Tax Purposes
If you are an Ohio taxpayer, contributions to CollegeAdvantage may be deducted from your Ohio taxable income in any amount up to $2,000 per year, per beneficiary, with unlimited carry forward. Should you choose to contribute more than $2,000 in a calendar year, any amounts above $2,000 may be deducted in future years, in increments up to $2,000 per year, until all contributions have been deducted. This means that $2,000 per year is not a contribution cap. If you have College Advantage 529 accounts for each of your children, you receive the deduction to your Ohio taxable income for contributions made to each beneficiary’s account.
Your annual account contributions summary can be viewed online and is also provided on quarterly account statements. After you’ve logged into your account, on the first page, scroll down to the “Year To Date Contributions” to see the calendar year and the total amount of contributions made into the 529 account during that year. Beneath that section is a listing of all the account transactions through the calendar year. The annual contribution summary will include contributions from other sources, such as gift contributions from grandparents, family, and friends. When adding up your eligible contributions to claim your Ohio tax deduction, exclude gift contributions from others and any college savings awards that you might have won. For the purpose the State of Ohio tax deduction, it is important you have your bank statements and/or copies of cashed check as the back-up documentation for this deduction. The CollegeAdvantage Statement is not sufficient as it includes contributions from all sources.
As for your grandparents, family, and friends who gave gift contributions, if they are also Ohio taxpayers, then they are also eligible for the Ohio income tax deduction. They will need to keep their own records of any gift contributions which were paid directly to a CollegeAdvantage account to receive the tax deduction. If they wrote a check you or your child, then that amount is not eligible for the state income tax deduction. For the purpose the State of Ohio tax deduction, it is important you have your bank statements and/or copies of cashed check as the back-up documentation for this deduction.
As always, please consult your tax advisor to discuss the treatment of your 529 account for your individual tax situation.
Posted on January 27, 2017