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#43293 - 05/09/08 04:36 PM tax credit recapture
haleybop
Registered: 09/26/07
Posts: 12 		I have a question as to when the tax credit recapture applies. If my state (utah) allows a tax deduction of $1650 per beneficiary and I make that contribution yearly but also take a withdrawel in the same year am I still entitled to the tax credit? I'm understanding it that the tax credit recapture is only used when the money is withdrawn and not used for educational purposes but a tax credit was taken?
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#43303 - 05/10/08 09:54 AM Re: tax credit recapture [Re: haleybop]
dallasdude
Registered: 05/10/08
Posts: 6 		Gosh, haleybop that would be paying the taxes because the money wasn't used for education? I don't know. That is so confusing. Now my head hurts. No, seriously, I think your understanding is right. It stands to reason that if you took the said funds out and got a state tax break, you would be obligated to use the said funds for educational purposes. As to if any interest/gains on those funds, the federal taxes and penalty might also be due. However, the original investment/basis should not be subject to federal taxation. Just stating the obvious haleybop.
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#43304 - 05/10/08 04:22 PM Re: tax credit recapture [Re: dallasdude]
anonymous
Registered: 03/29/05
Posts: 1944 		"It stands to reason" and reality don't go hand in hand when it comes to 529 plans. I don't know how Utah treats this, but the obvious is often wrong when it comes to 529 plans and how they are treated.
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#43326 - 05/12/08 04:05 PM Re: tax credit recapture [Re: anonymous]
Drew
Registered: 01/09/00
Posts: 2422 		It varies and I'm pretty sure UT is in the recapture of state tax credits for nonqualified distributions camp.

Yes, some states allow you to put it in , take a break, take it out next day for college and keep the break--but apparently some cut down the quick flip--I don't know for UT but apparently it still may work in UT.
_________________________
Drew

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