If you contributed to an Idaho 529 plan during the tax year, you may qualify for an Idaho income subtraction. If you took money out of your account, you may need to add some or all of the withdrawal back to your Idaho income if the funds weren't used for qualified education expenses.
What Is the Idaho 529 Plan?
Idaho's 529 college savings plan is called IDeal. It's a tax-advantaged savings program designed to help families save for future education expenses. The account owner designates a beneficiary and can use the funds for qualified education expenses under Internal Revenue Code Section 529.
Who Qualifies?
Qualified education expenses generally include:
- Tuition and mandatory fees
- Books and supplies
- Computers and required equipment
- Certain room and board costs for students enrolled at least half-time
- Certain expenses for special-needs students
- Up to $10,000 per year, per student for qualified K-12 tuition expenses at public, private, or religious schools
These expenses must meet federal 529 plan requirements.
What Is the Idaho Deduction Limit?
You can deduct contributions made to an Idaho IDeal account up to:
| Filing Status | Maximum Deduction |
|---|---|
| Single, Head of Household, or Married Filing Separately | $6,000 |
| Married Filing Jointly | $12,000 |
Contributions to an out-of-state 529 plan don't qualify for the Idaho deduction.
What Happens if I Take Money Out of My Account?
Qualified withdrawals used for eligible education expenses generally aren't added back to Idaho income.
However, if you make a nonqualified withdrawal, Idaho requires an addition to income. This can include:
- Withdrawals not used for qualified education expenses
- Certain transfers from an Idaho IDeal account to another state's 529 plan
- Certain transfers to an ABLE account
For Idaho residents, the addback is generally limited to contributions deducted in the year of the transfer and the previous tax year.
Can I Roll Funds Into an ABLE Account?
Yes. Federal rules allow certain rollovers from a 529 plan into an eligible ABLE account. However, Idaho may require an addback of previously deducted contributions when funds are transferred from an Idaho IDeal account. Review the withdrawal rules carefully before making the transfer.
What If I Don't Use the Money for Education Expenses?
The earnings portion of a nonqualified withdrawal may be subject to:
- Federal income tax
- Idaho income tax
- A 10% federal additional tax (penalty)
Because of these tax consequences, it's important to use 529 plan funds for qualified education expenses whenever possible.
How Do I Enter an Idaho 529 Plan in the Program?
To report your Idaho 529 plan contribution:
- Go to State
- Select Deductions from Income
- Choose Idaho College Savings Program
Enter your qualifying IDeal contributions, and the software will calculate any allowable Idaho deduction.
Additional Information
For more information about Idaho's IDeal College Savings Program, visit Idaho College Savings (IDeal). The Idaho instructions discuss the deduction on Form 39R, Part B, Line 14 for residents and Form 39NR, Part B, Line 9 for part-year residents and nonresidents.