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Hi,
assuming the salary for the year was 140k and 6200 of Virginia state tax was paid for the year, how much reduction in taxes would one see given the following scenario:
I know that the deduction limit for each kid (when filing jointly) is 4000x2 = 8k (meaning 16k for 2 kids). This is of course off of the VA state tax (not federal).
can someone help me figure out how much tax savings that'll translate to?
Location: Chapel Hill, NC, formerly NoVA and Phila
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It sounds like you've got it right. If the limit you can deduct from Virginia is 16K, then multiply the $16K times the VA tax rate, and that's what you are saving.
Here in NC, the limit we can deduct is $5K for filing jointly no matter how many children we have. Our tax rate is about 7.5%, so I am essentially saving about $375. Next year the NC tax rate is going down and we are losing the 529 deduction.
It sounds like you've got it right. If the limit you can deduct from Virginia is 16K, then multiply the $16K times the VA tax rate, and that's what you are saving.
Here in NC, the limit we can deduct is $5K for filing jointly no matter how many children we have. Our tax rate is about 7.5%, so I am essentially saving about $375. Next year the NC tax rate is going down and we are losing the 529 deduction.
wow, didn't know states took that benefit away.....
Location: Chapel Hill, NC, formerly NoVA and Phila
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Quote:
Originally Posted by Thinking-man
wow, didn't know states took that benefit away.....
Not every state offers it. Also, a few states offer the benefit no matter which state's 529 plan you invest in (doesn't have to be their own).
We just invested in a 529 plan for the first time this year and I was tempted to do Utah's or Virginia's because they both have an overall good reputation (and for VA I am hopeful I will move back there in the near future.) But I was swayed by the NC state tax deduction. Then I found out this is the last year we can take it. So it looks like I might be looking around again next year.
... How about a tax deduction for grandparents who contribute directly to grandchildren's 529's or prepaid college plans. Does anyone know of a tax break or good tax strategy for this?
... How about a tax deduction for grandparents who contribute directly to grandchildren's 529's or prepaid college plans. Does anyone know of a tax break or good tax strategy for this?
Live in a state that has a good contribution match or deduction...Kansas I think is one of the better ones...
Location: Chapel Hill, NC, formerly NoVA and Phila
9,779 posts, read 15,793,171 times
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Quote:
Originally Posted by jghorton
... How about a tax deduction for grandparents who contribute directly to grandchildren's 529's or prepaid college plans. Does anyone know of a tax break or good tax strategy for this?
I'm no expert. But you have to look up the state that the grandparents live in. If their state allows state income tax deductions if they invest in their state's 529 plan, then they should be able to take the deduction like anybody else. They are the account owners and the grandchildren are the beneficiaries. Not all states have such a deduction. (Note: there are a few states - 4, I think with PA being one of them - that allow a state income tax deduction for a contribution into any state's 529 plan).
ETA: Here is a good article about grandparents contributing to a 529 plan. There is more to think about than just the state income tax deduction.
... How about a tax deduction for grandparents who contribute directly to grandchildren's 529's or prepaid college plans. Does anyone know of a tax break or good tax strategy for this?
"Virginia residents who contribute to a Virginia 529 Plan can deduct up to $4,000 ($2,000 for 2008) from their state income tax return for each account they contribute to and are the owner of. This limit is lifted for taxpayers over 70 years of age."
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