Year-end information for owners and prospective owners of Wisconsin 529 College Savings plan accounts:
NEW 12/21/2015: Federal 529 rules now permit the costs of any computers, related software, and internet services as qualified higher education expenses if primarily used by the student (previously there were limits). This new law is retroactive to January 2015. Account owners seeking reimbursement for these now eligible 2015 expenses or for purchases made this month are reminded to submit withdrawal paperwork before December 31, 2015. Phone numbers and addresses for Edvest and Tomorrow's Scholar are on the 'Contacts' tab above.
Tax form 1099-Q will be mailed mid-January 2016 to account owners or beneficiaries receiving distributions during 2015.
In 2015, contributions by any Wisconsin adult reduce state-taxable income, dollar-for-dollar, up to $3,100 per beneficiary per year; the same amount will also apply in 2016. The contribution may be made to an existing account, or to a new one. (before 2014, only close relatives were eligible for this benefit)
Contributions in excess of $3,100 may be carried-forward for use in subsequent tax years.
A new rule affects contribution tax treatment when a withdrawal is made within a 365 day period. Two examples: One, Pat opens an account with $2,000 in April 2015, and claims $2,000 income subtraction on the 2015 tax return. In January 2016, $1,000 is withdrawn for qualified college expenses.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 the 2016 tax return. Two same situation as above, but the account was open with a $1,000 balance in 2014, before the 2015 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 would not be entered as income on 2016 taxes. This method is often called 'first-in, first-out.'
Contributions and distributions (for qualified expenses and nonqualified uses) are reported on new state Schedule CS, and attached to Form 1. The schedule and instructions are at the Department of Revenue website or here and here.
Incoming rollovers from other states' 529 plans continue to be 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. Amounts that received an earlier Wisconsin reduction are not eligible.
Effective January 4, 2016, the Maximum Account Balance is increased to $440,300, 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 now reviewed each year by the Board, and using a formula of college tuition and fee inflation, this amount may increase.
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 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 philosophy. 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 per month. You control the amounts and frequency of automatic deductions or lump-sum payments. Also enjoy lifetime contribution limits of $440,300 per beneficiary.
Most college costs at thousands of schools are eligible Qualified expenses include tuition, fees, books, room and board, or required expenses at most institutions nationwide--including technical schools, public and private colleges, universities, graduate schools, and also at many locations outside of the U.S.
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. 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 $3,100 per beneficiary from their Wisconsin taxable income for the 2015 tax year, up until April 15, 2016. 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 financial 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. Residents of other states should check to see if 529 plans in their home state offer favorable state tax advantages. The Edvest Facebook, Twitter, YouTube channel, and College Saving Connection blog pages are managed by the State of Wisconsin.