If you contributed to a qualifying West Virginia 529 plan during the tax year, you may be eligible for a subtraction from income on your West Virginia return. If you took money out of the plan and did not use it for qualified education expenses, some or all of the withdrawal may need to be added back to your West Virginia income.
What Is a 529 Plan?
A 529 plan is a tax-advantaged education savings program designed to help families save for future education expenses, including college, vocational school, and certain other educational programs.
What Expenses Qualify?
Qualified education expenses generally include:
- Tuition
- Required fees
- Room and board
- Books
- Equipment
- Supplies required for attendance
These expenses must meet IRS requirements for qualified educational expenses.
How to Report West Virginia 529 Contributions
West Virginia allows a subtraction for contributions made to the West Virginia Prepaid Tuition Trust or West Virginia Savings Plan Trust (SMART529). Contributions are reported as a subtraction from income on Schedule M.
To enter your contribution in the software:
- Go to State.
- Select Edit next to the West Virginia return.
- Choose Subtractions from Income.
- Enter the amount of your contributions to the West Virginia Prepaid Tuition Trust Fund.
Important: West Virginia requires an annual statement to support this deduction. If the annual statement is not provided when requested, the subtraction may be denied.
What If I Took a Distribution?
If you withdrew money from a West Virginia 529 plan and the funds were not used for qualified education expenses, the withdrawal may have to be added back to income on your West Virginia return.
West Virginia specifically requires taxpayers to add back withdrawals from a West Virginia Prepaid Tuition or SMART529 plan when the distribution was not used for qualifying educational expenses.
How to Report a Non-Qualified Withdrawal
- Go to State.
- Select Edit next to the West Virginia return.
- Choose Additions to Income.
- Enter withdrawals from a West Virginia Prepaid Tuition or SMART529 plan that were not used for qualifying expenses.
What Happens If the Money Is Not Used for Education?
Non-qualified distributions can have tax consequences:
- Earnings may be taxable as ordinary income.
- Earnings may be subject to a 10% federal penalty.
- West Virginia may require previously deducted contributions or other amounts to be added back to income.
What About Investment Changes and Carryovers?
Investment selections within a 529 plan may generally be changed up to twice per calendar year, and future investment allocations can typically be changed without limit, subject to plan rules.