Effective for withdrawals after 12/31/2017, the Tax Cuts and Jobs Act expanded the definition of qualified higher education expenses to allow up to $10,000 per year of 529 plan account funds to be used for elementary or secondary school tuition.
I understand that under Alabama Income Tax Law an amount up to $10,000 for taxpayers filing Married filing Joint can be deducted on your Alabama tax return if you contribute to a College Counts Alabama 529 Savings Plan, but does each taxpayer have to write a check for $5,000, or is one check for $10,000 from either spouse acceptable?
The taxpayers may write one check for $10,000 that is from a joint checking account.
Are qualified 529 Saving Plan withdrawals exempt from Alabama income tax?
Yes, the withdrawals are exempt under Alabama income tax.
What is a non‐qualified withdrawal from an Alabama 529 Savings Plan?
A non‐qualified withdrawal is one that is not used for qualified higher education expenses as defined by IRC section 529.
If I roll my money from a qualified 529 plan into another qualifying Alabama 529 plan, is the money exempt from Alabama taxes?
Earnings would not be taxed as long as the earnings remain in the qualifying plan, but would be taxed if a non‐qualified withdrawal is made.
Is a rollover from an out‐of‐state qualified 529 plan into another qualifying Alabama 529 plan by an individual that files a joint Alabama State income tax return eligible for an Alabama State income tax deduction of up to a $5,000 or $10,000?
An Alabama taxpayer filing jointly is eligible for an Alabama State income tax deduction of up to $10,000 for rollover contributions to the Alabama College Counts 529 Fund.
If I roll $7,500 into the Alabama 529 Savings Plan (contributions/basis equals $6,000 and the earnings portion equals $1,500), can I deduct the full $7,500 on my tax return or only the amount I contributed?
The full amount contributed into the 529 Plan can be deducted up to $5,000 per taxpayer. If you file Married filing Joint on your tax return, the maximum amount of $10,000 can be deducted.
When rolling over an out of state 529 plan to an Alabama qualifying plan, is the roll over into the Alabama qualifying plan (both the contributions and earnings portion) exempt from any current year Alabama income tax?
The rollover is exempt from Alabama income tax.
Does Alabama income tax law recapture previously deducted contributions when withdrawing money from my Alabama 529 Savings Plan for non‐qualified reasons?
Yes, the amount withdrawn is added back to the contributing taxpayer’s return, plus a 10% penalty.
What are the tax consequences on 529 plans that are purchased outside of Alabama?
No deduction would be allowed on your Alabama income tax return, and the income would be reported once it is withdrawn or distributed from that other state’s plan.
If the money from my Alabama 529 Savings Plan is used to pay for my son’s expenses at an out of state college, will it be considered taxable?
No, the money is not taxable as long as the money is used to pay for higher education expenses.
Is the money from my ” Florida 529 Savings Plan” taxable if it is used to pay for my son’s higher education expenses?
Yes, once the withdrawal is made, it would be taxable on your Alabama income tax return.
Is a contribution to an Alabama 529 Savings Plan with a December 2010 postmark deductible on my 2010 Alabama tax return, or does it have to be received by the plan before December 31st to be deductible on my Alabama tax return?
The postmark date will be accepted as the date of the contribution, as long as it is on or before December 31st. The contribution does not have to be received by the plan on or before December 31st.