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What is the amount of the subtraction allowed for contributions to a college savings account?
| Year | Single or Married Filing Joint | Divorced or Married Filing Separate^ |
|---|
| 2024* | $5,000 | $2,500 |
| 2023 | $3,860 | $1,930 |
2022
| $3,560 | $1,780 |
| 2021 | $3,380 | $1,690 |
| 2020 | $3,340 | $1,670 |
^For the 2024 taxable year and forward, the reduced subtraction only applies to individuals who are married and file a separate return (filing status of head of household, married or married filing separately). For 2023 and prior, this amount also applies to the divorced parents of the beneficiary.
*Contributions to a college savings account for 2024 must be made on or before April 15, 2025.
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May I claim a subtraction for a contribution to a college savings account in a state other than Wisconsin?
No. The Wisconsin subtraction for contributions to a college savings account only applies for contributions to a Wisconsin college savings account. The subtraction does not apply for contributions to a college savings account in any other state. The qualified Wisconsin college savings accounts are
Edvest and
Tomorrow's Scholar.
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May a person claim the subtraction from income for an amount rolled over from a college savings account in another state into a Wisconsin college savings account?
For the 2015 and following taxable years, rollovers of the principal amount into a Wisconsin college savings account are eligible for the subtraction from income, subject to applicable yearly limitations. Amounts in excess of the amount allowed as a subtraction may be carried forward to future years and claimed as a subtraction subject to the yearly limitations.
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May a person claim the subtraction from income for an amount rolled over from one Wisconsin college savings account to another?
For the 2015 and following taxable years, rollovers from one Wisconsin college savings account into another Wisconsin college savings account are not eligible for the subtraction from income. A rollover is not eligible for the subtraction from income since the amount of the rollover is not included in federal adjusted gross income.
Note: This supersedes guidance in
Wisconsin Tax Bulletin 128 in January 2002.
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Does the annual limit for the college savings account subtraction apply to the person making the contribution or to the beneficiary?
The annual limit for the income subtraction applies to each eligible contributor. For 2024, the maximum annual subtraction for contributions to a Wisconsin college savings account is $5,000 ($2,500 if married and filing a separate return) per beneficiary.
If a person is a beneficiary of more than one account, the beneficiary may have multiple contributors make contributions to their account and the total of all contributions may exceed $5,000.
Example: An individual makes two $4,000 contributions to two different accounts that have the same beneficiary. While the beneficiary has $8,000 contributed to their accounts for the year, the maximum subtraction allowed for the contributor in 2024 is $5,000 ($2,500 if married and filing a separate return). The excess $3,000 may be carried forward and subtracted in 2025 if the contributor does not exceed the annual subtraction limit for contributions to the beneficiary's account in 2025.
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Can I claim a subtraction for a contribution to a college savings account where I am both the owner of the account and the beneficiary?
Yes. Your contributions into a college savings account are eligible for a Wisconsin subtraction even if you are both the owner and beneficiary of the account.
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Excess contributions for 2014 (and after) can be carried forward and subtracted in a later year. Does this apply to pre-2014 excess contributions?
No. The carryover provisions do not apply to pre-2014 excess contributions.
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Who adds an amount to income when a distribution was not used for qualified higher education expenses?
According to Edvest.com, only the owner of an account can request distributions. Therefore, the owner of the account must add to income the amount of distributions received on or after June 1, 2014, that resulted in a federal penalty because the distribution was not used for qualified higher education expenses. The amount to be added to income cannot be more than the total dollar amount contributed to the account for 2014 and thereafter.
Note: If a beneficiary receives a refund of qualified higher education expenses from an eligible education institution and recontributes those funds within 60 days to a qualified Wisconsin college savings program of which the individual is a beneficiary, the amount of the refund recontributed is not included in Wisconsin income.
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Does the amount rolled over into an ABLE account from a college savings account have to be included in gross income?
For distributions made after December 22, 2017, the amount rolled over into an ABLE account of the designated beneficiary, or a member of the family of the designated beneficiary, from a college savings account does not have to be included in gross income so long as it falls within the annual limitation. Any rollover that exceeds the annual limitation must be added back to income to the extent the contribution was previously subtracted from income for Wisconsin. In addition, you must reduce the amount of contribution carryover available by the amount rolled over that was not added back to income, even if the amount rolled over was less than the exclusion. The maximum amount rolled over cannot exceed the annual gift tax exclusion under sec. 2503(b), IRC, for that year, less the sum of all other qualified contributions to the account for the taxable year.
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Does the amount rolled over into a Roth IRA account from a college savings account have to be included in gross income?
Starting on January 1, 2024, amounts meeting certain qualifications can be rolled over from a college savings account to a Roth IRA that is for the benefit of the designated beneficiary. To the extent the rollover does not exceed the limitations, no addback to income is required. Any rollover that exceeds the limitation must be added back to income to the extent the contribution was previously subtracted from income for Wisconsin. You must reduce the amount of carryover available by the amount rolled over that was not added back to income, even if the amount rolled over was less than the exclusion.
Note: Many of the limitations for the rollover to qualify are dependent on the designated beneficiary.
See the Schedule CS instructions (Part IV, Section D) for a worksheet showing the computation of the maximum qualified amount.
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What are qualified higher education expenses?
Qualified higher education expenses include:
- Tuition and fees
- Books, supplies, and equipment
- Expenses for special needs services needed by a special needs beneficiary in connection with enrollment or attendance at an eligible educational institution
- Certain expenses for room and board incurred by students enrolled at least half-time
- The purchase of computer or peripheral equipment, computer software, or internet access and related services if it is to be used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible educational institution (not including expenses for computer software for sports, games, or hobbies unless the software is predominantly educational in nature)
- For distributions made after December 31, 2017, expenses paid for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school (up to $10,000 per year)
- For distributions made after December 31, 2018, expenses for fees, books, supplies, and equipment required for the designated beneficiary's participation in an apprenticeship program registered and certified with the Secretary of Labor under section 1 of the National Apprenticeship Act
- For distributions made after December 31, 2018, amounts paid as principal or interest on qualified student loans of the designated beneficiary or the designated beneficiary's sibling, but not more than $10,000 (lifetime of the individual). Note: The same amount may not be claimed as a student loan interest deduction if it was treated as a qualified higher education expense for purposes of a qualified distribution from a college savings account
Caution: The private school tuition subtraction may not be claimed for amounts withdrawn from a college savings account used to pay for private school tuition.
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Is a nonresident of Wisconsin required to include in Wisconsin income the amount of a distribution rolled over to a college savings account in another state?
The requirement to include an amount in Wisconsin income when a distribution from a Wisconsin college savings account is rolled over to a college savings account in another state does not apply when the distribution is made to a nonresident of Wisconsin. Assuming the nonresident has no other income from Wisconsin sources, the nonresident would not be required to file a Wisconsin income tax return.
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As a practitioner, how will I know whether an Edvest account has been transferred to another state?
According to Edvest.com, the owner of the account will receive quarterly and annual account statements which include withdrawals from the account. Withdrawals include outgoing rollovers into another state's account. In addition, Edvest will annually issue federal Form 1099-Q,
Payments from Qualified Education Programs (Under Sections 529 and 530), to the owner or beneficiary (depending on who received the withdrawal).