Tax benefits for College Savings Iowa 529 Plan
We can help you save on taxes while you save for education.
Your College Savings Iowa 529 account assets grow deferred from federal and state income taxes.
You will not pay taxes on money withdrawn from your College Savings Iowa 529 account to pay for qualified education expenses.*
Tax deductions for Iowa taxpayers
Iowa taxpayers who are Participants can deduct up to $3,387 for 2019 (adjusted annually for inflation) of their contributions per Beneficiary, including rollovers, in determining their adjusted gross income for Iowa income tax purposes. This deduction applies to each Beneficiary account they own and contribute to. For example, married Participants who contribute to separate accounts on behalf of their two children can deduct up to $13,548 (4 x $3,387) in 2019. **
Note: Iowa taxpayers can contribute to their College Savings Iowa 529 accounts until the Iowa state income tax-filing deadline, which is generally April 30.
Qualifying contributions are deducted on line 24, item "g" of your Iowa income tax return. Most tax software programs will ask for this information and correctly indicate the appropriate reason for the deduction.
Federal gift tax incentive
You can contribute up to $75,000 in a single year for each beneficiary ($150,000 for a married couple filing jointly) without incurring federal gift tax, provided you do not make any other gifts to that beneficiary for 5 years.***
Before taking advantage of this incentive, you should consult a qualified tax advisor.
Points to consider
Your state's plan may offer additional tax benefits
If you are a resident or taxpayer of another state, you should consider whether that state offers a 529 plan with tax advantages or benefits that are not available through College Savings Iowa. Other state benefits may include financial aid, scholarship funds, and protection from creditors. Be sure to weigh all the pros and cons of a particular plan before you enroll.
There is a recapture for rolling over your assets to another state's 529 plan
If you are an Iowa state taxpayer, a rollover of assets from your College Savings Iowa 529 account to a qualified 529 plan in another state is subject to the recapture of all previous Iowa state income tax deductions made during the life of the account.
Contributions are not deductible from federal income tax
You cannot deduct the contributions that you make to any 529 college savings plan from your federal income taxes.
Iowa Taxpayers can use College Savings Iowa 529 assets to pay K-12 tuition
Beginning in 2018, qualified education expenses for federal tax benefit purposes also include K-12 tuition at public, private or religious schools up to $10,000 per yer per student in the aggregate across all qualified tuition programs for a designated student. In addition, Iowa taxpayers can use the College Savings Iowa 529 Plan assets to pay for K-12 tuition with no Iowa state tax consequences as long as the student attends an elementary or secondary school in the state of Iowa which is accredited under Iowa Code Section 256.11 and adheres to the provisions of the federal Civil Rights Act of 1964 and Iowa Code Chapter 216. State tax treatment of K-12 withdrawals is determined by the state(s) where the taxpayer files state income tax. If you are not an Iowa taxpayer, please consult with a tax advisor.
Recent legislation allows rollovers from 529 plans to ABLE plans
Recent legislation allows rollovers from 529 plans to ABLE plans without federal tax consequences. For Iowa state income tax purposes, a rollover from College Savings Iowa to IAble will not result in a nonqualified withdrawal from College Savings Iowa but will also not entitle the taxpayer to a deduction to the extent that the rollover was previously deducted as a contribution to College Savings Iowa. College Savings Iowa 529 account owners who are residents of other states should consult with a tax advisor about their state laws. Rollover amounts from a 529 account apply towards the overall limitation on amounts that can be contributed to an ABLE account within a taxable year. Any ammount rolled over that is in excess of this limitation shall be includable in the gross income of the distributee. This provision applies only to distributions made no later than December 31, 2025.
For more information about the tax benefits offered by College Savings Iowa, refer to our Program Description.