Years ago we opened "Education IRA" accounts for our kids at our credit union. These days I guess they're called Coverdell education savings accounts. The only investment options were CDs (around 3.5% so not too bad for this era) and they'll mature soon. We quit putting money in those accounts when we started funding 529 plans for them.
The Virginia 529 plan allows up to a $4,000 per year state income tax deduction, per beneficiary, which is very nice. The tax benefit for contributions over $4K even rolls over to future years, without any carryforward limits, which is even nicer.
I understand that a Coverdell account can be effectively rolled over into a 529, without tax penalty, if a withdrawal is made as a 'qualifying distribution' and deposited into the 529 that same calendar year. No problem.
My question is this: do funds taken from a Coverdell and rolled into a 529 plan qualify for the state income tax deduction? I would assume so ... in years past, our tax return had no spot to document the source of a 529 contribution, only that such a contribution was made. But you know what they say about assumptions.