Iowa 529 Rollover Question

[throwittoblythe]

For the CF tax pros...

We just moved to Iowa from Minnesota. We have a Minnesota 529 plan for each of our kids. Minnesota does not allow tax deduction of 529 contributions, but Iowa does. In reading online, it appears that when I roll over these 529 plans to Iowa, the rollover amount can be deducted for this tax year.

Am I right? I'd be rolling over about $7k, so will I be able to deduct all of that? I'm guessing I'll just get some sort of a form when I roll it over that I can use when filing my taxes in April?

Thanks!

 

[DeereClone]

I don’t know the answer to your specific question, but just wanted to say there might be a benefit to splitting out when you roll them into different tax years to spread out that initial deduction on the rolled amount vs taking it all in one year.

 

[throwittoblythe]

Yes, you can roll over to Iowa and deduct up to $3,439 per child/parent during this tax year.

If the total amount is $7,000 you're right at the point where it makes sense to roll everything over at once, but if it is more than that it might make sense to split your rollover into multiple tax years.

Awesome, this is great info! It's actually not split 50/50 as one kid is 4 yrs older than the other. So, it's $4500 for one kid, and $2500 for the other. Sounds like I'll need to rollover the older kids amount into two tax years.

Thank you!

 

[brianhos]

For the CF tax pros...

We just moved to Iowa from Minnesota. We have a Minnesota 529 plan for each of our kids. Minnesota does not allow tax deduction of 529 contributions, but Iowa does. In reading online, it appears that when I roll over these 529 plans to Iowa, the rollover amount can be deducted for this tax year.

Am I right? I'd be rolling over about $7k, so will I be able to deduct all of that? I'm guessing I'll just get some sort of a form when I roll it over that I can use when filing my taxes in April?

Thanks!

You can only deduct like $3500, unless you split it into multiple accounts with a spouse.

 

[throwittoblythe]

Yes, you can roll over to Iowa and deduct up to $3,439 per child/parent during this tax year.

If the total amount is $7,000 you're right at the point where it makes sense to roll everything over at once, but if it is more than that it might make sense to split your rollover into multiple tax years.

So it's $3439 per child or per parent? We have two adults (my wife and I) and two kids.

 

[throwittoblythe]

not to get into the weeds too much here, but if you're married $4,500 can be brought over in one year and split between spouses. For example, I have two kids and four accounts - one from each parents to each kid which allow us to deduct a maximum of $13,756 per year ($3,429 x 4 if we have extra money laying around - ha!).

It takes 60 seconds to set up an account so it's not hard or complicated at all. If you're worried about getting the tax deduction on that extra $600, here's the sour truth: the tax deduction on $600 may not be worth keeping accounts open in two states for an extra year. If it were me I'd roll it all over at once and close the MN account.

Ok, yeah. This is more complicated than I thought. Right now we just have two accounts, one for each kid (in MN). I'm planning to do the same in Iowa, as well, for now. And I agree with your point, not sure waiting another year to rollover that extra $600 is worth it.