Understanding contributions to Qualified Tuition Programs (529 Plans) in Lacerte

This article will help you understand and enter Qualified Tuition Programs in Lacerte.

Qualified Tuition Programs, also called 529 plans or QTPs, are programs that allow you to save up for or prepay a student's qualified higher education or K-12 expenses.

Tax treatment

For federal income tax purposes, QTPs generally function like a Roth IRA.

• You contribute after-tax dollars to the plan. The amount you contribute can't be deducted on your tax return.
• QTP earnings accumulate tax-free while they're in the account.
• When the beneficiary of the plan needs to pay for higher education, they get to withdraw money - both contributions and earnings - tax-free.

For more information on Qualified Tuition Programs, see IRS Pub. 970.

Entering distributions

No tax is due on a distribution that is used to pay qualified education expenses. The beneficiary generally doesn't have to include any of the earnings from a QTP in their income, as long as the distribution doesn't exceed their education expenses.

• QTP distributions are typically reported on Form 1099-Q.
• Enter distributions on Screen 14.3, Education Distributions.
  • See here for more input details.

Entering contributions

Contributions to a QTP can't be deducted on your federal tax return. However, some states allow a deduction for contributions.

Generally, these contributions are entered in Screen 51, Modifications, but there are some states that require additional searching for 529 plans. See more about these states below.

Entering contributions for 529 plans not available in the Modifications section

Most states allow for 529 plan entries in the state's Modifications section, but some require visiting a different screen. For example:

• Indiana:
  1. Go to Screen 53.111, Other Indiana Credits.
  2. On the left side of the program, click on the 529 Credit section.
  3. Make the entries in the appropriate boxes.
• Maryland:
  1. Go to Screen 51.274, Maryland 529 Plan.
  2. Make the entries in the appropriate boxes.