Simple Cost Sharing Agreement With 529 In Maryland
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FAQ
Who uses the 1099-Q for their tax return? Whoever the 1099-Q is issued to must report that 1099-Q on their tax return. In other words, the person whose SSN is on the 1099-Q should report the form – it could be the beneficiary student or the account owner, who may be a parent or other relative.
Each January, the Maryland College Investment Plan issues Form 1099-Q for any distributions taken during the previous calendar year. This form is mailed to the beneficiary; however, if the distribution was made payable to the account owner, the form is issued to the account owner instead.
If your earnings are taxable, you must report the taxable earnings (box 2 on the 1099-Q form) on line 21 of IRS form 1040. If additional penalties apply, you also may need to complete IRS form 5329. Consult a tax professional for more information.
This year, a big change happened to 529 college savings plans. As of 2024, families can roll over unused 529 funds to the account beneficiary's Roth individual retirement account, without triggering income taxes or penalties, as long as the 529 plan has been open for at least 15 years.
Maryland 529 plans are the only plans to offer Maryland taxpayers an annual Maryland State income subtraction on contributions of up to $2,500 per Prepaid College Trust account or per College Investment Plan beneficiary.
Where do I report it? Select State from the navigation bar. Edit Maryland state return. Select Subtractions from Income. Select Other Subtractions from Income. Select subtraction XA/XB, whichever corresponds to your 529 plan, from the list and report amount.
When the Form 1099-Q is issued to the 529 plan beneficiary, any taxable amount of the distribution will be reported on the designated beneficiary's income tax return. This typically results in a lower tax obligation than if the Form 1099-Q is issued to the parent or 529 plan account owner.
Closing the Savings Gap For instance, if you opened a 529 account for a newborn this year and contributed $250 a month, Vanguard's college savings calculator estimates you'd have more than $113,000 when your child heads off to college in 18 years. That's more than double your $54,000 investment.
If an investor opened a tax-deferred 529 account with an initial investment of $2,500 and contributed $100 every month for 18 years, the account could be worth over $6,300 more than with similar contributions into a taxable account.
