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.
I emailed the VA 529 people a few days ago, still waiting on an answer. I bet they'll just tell me to consult my tax adviser and dodge the question.
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