Tax season is officially underway, and individuals are preparing their financial records to get tax returns ready. Here are some factors to consider --- and to discuss with a tax professional--- when preparing your tax return:
If you had a distribution from your Virginia529 account(s) during 2018, a 1099-Q form was mailed for tax purposes.
If a distribution was made payable to an Account Owner, a 1099-Q was mailed to the Account Owner and is available via secure online access at Virginia529.com. Simply log in to your account, locate the “View My Account” tab, and select “1099-Q(s)” from the dropdown. Due to privacy issues, if a distribution was payable to a school or to the beneficiary, the beneficiary will receive the Form 1099-Q in the mail. In these instances, 1099-Qs will not be available online.
Reporting 1099-Q Amounts on Your Tax Return
Virginia529 is required to report distributions to the IRS with Form 1099-Q. If the distribution taken on your account did not exceed the total amount of 2018 qualified higher education expenses incurred, you should not need to report the distribution on your tax return. If, however, the distribution exceeded your total qualified higher education expenses, consult a tax professional for more information as you may have income tax consequences.
Reporting Contributions on Your Tax Return
Virginia529 account owners who are Virginia taxpayers may deduct contributions up to $4,000 per account per year with an unlimited carryforward to future tax years, subject to certain restrictions. Those account owners age 70 and above may deduct the entire amount contributed to their Virginia529 account in one year. In addition, contributions to Virginia529 accounts are treated as a completed gift by the account owner to the beneficiary. This means contributions up to $15,000 a year, or up to $30,000 if married, may be gift tax free. You should consult your tax advisor regarding the specific tax consequences of contributions.