There is still time for Wisconsin residents to get an income tax deduction for Edvest 529 college savings to account for contributions for the 2021 tax year. The deadline for making 2021 contributions is April 18, 2022. This contribution can be made to existing Edvest College Savings Plan accounts, or you can open a new account and make a 2021 contribution.
Wisconsin residents can deduct up to $3,380 in 2021 per child or grandchild on their state tax returns for contributions made to the Edvest College Savings Plan. (Edvest, 2022) Anyone who contributes can claim this state tax deduction, regardless of their relationship to the child.
The Wisconsin income tax deduction for Edvest account contributions has been increased to $3,560 for 2022. However, 2021 contributions made in 2022 will still be subject to the $3,380 2021 tax deduction limit. (Edvest, 2022) If a contribution larger than the $3,380 in 2021 state income tax deduction is made, you may carry forward the balance of the contribution that wasn’t used for a tax deduction to use in a future tax year.
There are no annual contribution limits for 529 College Savings Accounts, but Federal gift tax limits apply. The Federal Gift Tax limit was increased to $16,000 in 2022. (Internal Revenue Service, 2021) Any contributions made to 529 accounts larger than the annual exemption amount may require filing Gift Tax forms. A strategy can be implemented to contribute a larger amount in a single tax year without filing a gift tax return.
The primary advantages of saving for college expenses with 529 accounts are that investment earnings grow on a tax-deferred basis, and distributions are federal and state tax-free for qualified college expenses or even qualified K-12 Tuition expenses.
Please consult with your tax advisor before investing.