2021 Tax information for Wisconsin account owners

In 2021, contributions made by any Wisconsin adult can reduce their state-taxable income, dollar-for-dollar, up to $3,380 per beneficiary per year. The contribution may be made to an existing account you own, another Wisconsin account, or to a new account.

For the 2022 tax year, the maximum deduction is $3,560 per year, per beneficiary for married/joint filers ($1,780 for married filing separate status and divorced parents of a beneficiary).

• In 2021, contributions in excess of $3,380 may be carried-forward to be applied in subsequent tax years. The subtraction for married filing separately or divorced parents is half the amount, or $1,690. Numbers are subject to an inflation adjustment and rounding each year.
  
  
• Incoming rollovers from other states' 529 plans are accepted. The portion that is principal or contributions may qualify for reducing your Wisconsin taxable income, including carry-forward for subsequent years; the portion attributed to growth is not eligible for a tax deduction on your Wisconsin income taxes. Amounts that received a previous Wisconsin reductions are not eligible.
  
  
• The 365-Day Rule effects the tax treatment on contributions when a withdrawal is made within a 365-day period. Two examples: One, Pat opens an account with $2,000 in December 2020 and subtracts on their 2020 tax return. In August 2021, $1,000 is withdrawn for qualified college expenses. Since the $1,000 had not been in the account for 365 days, $1,000 is then added back as taxable income on their 2020 tax return. Two same situations as above, but the account was open with a $1,000 balance in 2020, before the 2021 addition of $2,000. In this case, the withdrawal would be considered as taken from the older money outside of the 365-day window and is not reported as income on 2020 taxes. This method often follows 'first-in, first-out' accounting principles.
  
  
• Contributions and distributions (for qualified expenses and non-qualified uses) are reported on the State of Wisconsin DOR Schedule CS, and attached to Form 1, the state income tax return. The schedule and instructions are at the Wisconsin Department of Revenue website or here and here.

Wisconsin's Maximum 529 Account Balance is $527,000 as the sum of all Wisconsin plan accounts for the same beneficiary (i.e., Edvest plus Tomorrow's Scholar plus Tuition Units). This amount is effective as of January 2022.

Does your family have college savings needs? 

Edvest and Tomorrow's Scholar can help
Higher education is crucial to helping children achieve their dreams and planning ahead for those expenses can really help.  Edvest and Tomorrow's Scholar, the two-college savings plans in Wisconsin's 529 College Savings Program, offer an easy and flexible way for families to prepare for these costs.

The program offers valuable benefits

An array of low-cost investment options - Choose from portfolios that range from conservative to more aggressive allocations to align with your time frame and investment objectives. Both passive (indexed) and actively managed portfolios are available, along with stable value choices.  Institutional class investment fees make college savings more affordable.

Flexible contribution amounts - Open an account for as little as $25, plus consider recurring contributions for as little as $5 per month.  You control the amounts and frequency of automatic deductions or lump-sum payments. The maximum account limit is $527,000 per beneficiary.

Most college costs at thousands of schools are eligible - Qualified expenses include tuition, fees, books, room and board, computers, related software or internet services, or required expenses at most institutions nationwide--including trade and technical schools, professional certificate programs, public and private colleges, universities, graduate schools, and also at many locations outside of the U.S.  Plus, under the 2019 Federal SECURE Act, qualified expenses now also include the cost of qualified apprenticeships, and up to a $10,000 one-time repayment of student debt and use $10,000 toward K-12 education.

No age, income, or time limits - Any adult can contribute to an account--there are no income level restrictions, or age limitations for owners or beneficiaries (minimum age of 18 for account owners).  Accounts may also be used for graduate school, continuing education, or classes later in life.

Federal and state tax advantages - Earnings in your account grow both federal and state tax-free when used for qualified higher education expenses.

Annual state tax benefit - Any person may subtract contributions up to $3,380 per beneficiary from their Wisconsin taxable income for the 2021 tax year, up until April 18, 2022. Amounts in excess may be carried forward for use in future tax years.  Contributions to accounts with yourself as named beneficiary are also eligible for this benefit.

To view contribution, rollover and distribution FAQs for College Savings Accounts at the Wisconsin Department of Revenue website, click here.

More information about the Edvest direct-sold plan is available online or by calling 1-888-338-3789. The Tomorrow's Scholar plan is only available through registered investment advisors and fee-only planners.  Both plans are qualified tuition programs under 26 USC 529, offering certain tax benefits, and are administered by the State of Wisconsin’s Department of Financial Institutions.  Residents of other states should check to see if 529 plans in their home state offer favorable state tax advantages, scholarship eligibility, or creditor protection.