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529 state tax deduction for multiple states

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  • 529 state tax deduction for multiple states

    I will be moving in 2019 from RI to PA and will have to file in both states. RI only allows 1k state tax deduction and PA allows to deduct 529 contributions up to 15k per child regardless of which state you use for 529. Could I contribute 16k to 529 in 2019 and take 1k off my RI state tax and 15k off my PA taxes? I’m moving mid year, do I need to wait until I have 15k in PA income prior to making that 529 contribution?

  • #2
    1) Yes and 2) no would be my guess.


    • #3
      That should be fine as long as you're not double-dipping. However, I have not researched the nuances of each state's requirements, so it might be something to take up with your CPA. otoh, it's not worth hiring a CPA just to be sure you can take a $1k tax deduction in RI if you're otherwise comfortable with handling your own return.
      My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
      Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clients


      • #4
        PA’s Schedule O doesn’t specify that you exclude other state benefits. Nor does the general instructions for form PA-40. I would look to see what RI tax forms say with respect to benefits in other states for partial year residents.

        Having filed in both states and having a RI 529 plan for one of my children I would absolutely keep the RI 529 and utilize the PA 529 deduction benefit moving forward. RI 529 ERs for state residents or grandfathered plans (which you would be) are easily some of the lowest cost of not THE lowest cost in the nation.

        Also, PA allows a max 15k deduction per beneficiary per taxpayer, twice what you have estimated:

        The only limitation of deduction otherwise is that you can’t deduct more than your PA taxable income for the year, so if you’ll be earning 30k or more in PA in 2019 you won’t have to worry. But I wouldn’t make the large contribution to the RI 529 until you are a PA resident, just to be safe. Though I have no instruction to point to that supports that statement.


        • #5
          Yes I know it could be up to 30k per child. I was unaware that my son’s RI 529 would be “grandfathered” in for the no program fee for residents. I have a 529 with vanguard and no 529 for my oldest and youngest daughters, Respectfully. I would imagine switching the vanguard 529 to RI and opening another RI 529 for them would be the prudent thing to do while a RI resident? I did not find anything about “grandfathering” and moving states on RI 529 website and am waiting to get response from email about it.


          • #6
            Not sure it matters but what state is the Vanguard 529 in? I’d personally open up RI 529s for any/all kids that you want to open a 529 for before you leave. My last several years are proof that you are grandfathered, but don’t believe me - I’m a rando on the internet. Get it in writing from the RI 529 plan.


            • #7
              WCICON24 EarlyBird
              BTW, from the plan document (dated 2016, but obviously updated per year):

              “Rhode Island Resident: An Account Owner or Beneficiary who resides in Rhode Island, an Account Owner who works for a Rhode Island Employer or has a principal place of business in Rhode Island and/or an Account Owner who established an Account prior to July 8, 2016 (regardless of residency).“

              You will be grandfathered.