Quick answer: Virginia lets the owner of a Virginia529 account deduct up to $4,000 per account each year from Virginia taxable income, with any extra carried forward to future years. Owners age 70 or older can deduct their full contribution in one year.
Virginia gives families a state tax deduction for saving for education through Virginia529. For parents and grandparents in Ashburn and across Loudoun County, it is one of the simplest ways to lower your Virginia tax each year.
How the deduction works
- You can deduct up to $4,000 per account each year on your Virginia return
- The limit applies to each Virginia529 account separately, so families with several children can deduct more
- Only the owner of the account can claim the deduction
Carryforward of larger contributions
If you contribute more than $4,000 to an account in a year, the extra amount carries forward. You keep deducting up to $4,000 a year until the full contribution has been deducted.
Example: A $20,000 contribution to one account can be deducted $4,000 a year for five years.
The age 70 rule
If you are 70 or older by December 31, you can deduct the full amount you contribute that year, with no $4,000 limit. Grandparents who own the account can get a large deduction all at once.
What it is worth
Virginia’s top income tax rate is 5.75%, so a $4,000 deduction saves up to about $230 a year per account. Over many years and several children, that adds up, and the account grows tax free when used for qualified education costs.
Tips for families
- Contributions must be made during the tax year to count for that year
- Open an account for each child to multiply the $4,000 limit
- Grandparents should own the account if they want to claim the deduction
- Keep your annual contribution statements for your tax records
Virginia 529 Deduction FAQs
Can I deduct contributions to another state’s 529 plan in Virginia?
No. The Virginia deduction applies only to contributions to Virginia529 accounts.
What is the deadline to contribute for the Virginia 529 deduction?
Contributions must be made by December 31 to count for that tax year. Unlike some IRA contributions, you cannot make them up to the filing deadline.
Is there a federal tax deduction for 529 contributions?
No. There is no federal deduction, but earnings grow federal tax free and withdrawals are tax free when used for qualified education expenses.
What happens to the Virginia deduction if I take a nonqualified withdrawal?
Amounts you previously deducted may have to be added back to your Virginia income if you take a nonqualified withdrawal or roll the money to another state’s plan.
Can leftover 529 money be rolled into a Roth IRA?
Yes, under federal law, within limits. The 529 account must have been open at least 15 years, the beneficiary must have earned income, rollovers count against the annual IRA limit and the lifetime cap is $35,000.
Make the most of your deductions
Our individual tax preparation for families in Ashburn and Loudoun County claims every Virginia deduction you qualify for, including Virginia529 carryforwards.
This article is general information and not tax advice for your situation. Tax rules change, so talk with a qualified professional before making decisions.
