IRA and 529 contributions

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  • LBR
    Member
    • Mar 2014
    • 37

    #1

    IRA and 529 contributions

    A client (MFJ) has an AGI of $350,264.00 and taxable income of $288,542.00. He is S/E and contributes to a defined benefit plan. He is on an extension until 10/15/14. Can he contribute to a 529 plan for his grandkids with/out any tax ramifications? If so, does he have until 10/15/14 to make a contribution for tax year 2013?
    I understand that he earns too much income to have his wife invest in and IRA.
    Thank you,
    Linda
  • mastertaxguy
    Senior Member
    • Mar 2013
    • 408

    #2
    529 Plans-1040 on Extention

    Contributions to 529 plans are made on a calendar year basis. The extention to file is of no consequence. The contributions to such a plan are treated as a gift to the beneficiary(ies) and may require a gift tax return if the amount exceeds the annual exclusion which for 2014 is $14,000.00. There are special gift tax rules for contributions to 529 plans allowing a "spread out" of larger contributions (gifts) up to $70,000 to a 529 plan over a 5 year period.

    There is NO Federal income tax deduction/adjustment or credit for taxpayers making contributions to 529 plans. Some states allow a deduction, subtraction or credit.
    Friends double; family triple. Don't buy an audit for yourself. If someone has to go to jail make sure it is the client. Remember it is only taxes, nothing important.

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