NC Income Tax Deduction for Contribution to 529 Plan
I previously blogged about the 2007 income tax deduction available to North Carolina residents to contribute to a North Carolina 529 College Savings Plan account. A deduction of up to $2,500 is available for single taxpayers and up to $5,000 for married couples filing jointly. Initially the deductions were subject to income limitations, but no longer.
In addition, rollovers from 529 plans in other states are considered contributions, so those taxpayers (like me) who set up accounts in another state years ago when the NC Plan was lousy, can now do a rollover to the NC Plan and take a deduction, even without making any new contributions. Rollovers are allowed only once every 12 months.
Like you, we set up a 529 in MO for each of our two children back when the NC plan was not very good. Each child has about $24k in his/her account, and we want to roll them over to the NC plan this year. If the rollover is considered a contribution for purposes of deductions from NC state income tax, does it also trigger a gift tax situation (either federal or state)?
ANSWER: No, the gift took place when the contribution was made to the original account (and most likely fell under the $12,000 annual exclusion. A rollover does not give rise to an additional gift.
What is the deadline to make contributions for 2007? Is it 12/31/07, or 4/15/08?
ANSWER: I believe it is 12/31.