#45750 - 01/24/10 12:46 PM
529 Credit Card Rewards - qualify as contribution for state tax deduction?
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AZcoyote
Registered: 01/24/10
Posts: 5
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We have a 529 plan in Arizona for our daughter. Our Fidelity MasterCard automatically deposits 2% into the account. At year end, Fidelity added about $500 to the 520 plan.
When filing my state taxes, I know that we are allowed to deduct contributions to the 529 plan in Arizona ($750 for singles, $1500 for joint filers.) My question is, can we count the $500 that was deposited from our Fidelity credit card rewards?
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#45751 - 01/24/10 09:54 PM
Re: 529 Credit Card Rewards - qualify as contribution for state tax deduction?
[Re: AZcoyote]
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Drew
Registered: 01/09/00
Posts: 2868
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Unless there is a rule which says NO and I'm not aware of same --but must admit I didn't check AZ rules, just my state rules--I'd take it. There is an obvious quid pro quo and its your own money.
Now if you run a multimillion dollar small business so as to generate "rewards" elsewhere it may begin to smell and I'd not venture to know when it smells too bad.
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Drew
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#45753 - 01/26/10 03:04 PM
Re: 529 Credit Card Rewards - qualify as contribution for state tax deduction?
[Re: Drew]
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Dopps
Registered: 01/23/02
Posts: 1232
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I would take a dissenting opinion, as one could argue that this 2% "rebate" is NOT your money going into the 529 and thus not your deduction. Your money went to pay the merchants on your credit card statement, and this is perhaps Fidelity's money. This is really a question for your accountant, as we here (except Joe) are not one.
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#45754 - 01/26/10 06:02 PM
Re: 529 Credit Card Rewards - qualify as contribution for state tax deduction?
[Re: Dopps]
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Drew
Registered: 01/09/00
Posts: 2868
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No, I fail to follow where the 2% is anything but your money and its a clear quid pro quo for your initial gross amount paid in. No way did Fidelity out of the goodness of its heart make a gift to you of anything.
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Drew
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#45755 - 01/27/10 07:29 PM
Re: 529 Credit Card Rewards - qualify as contribution for state tax deduction?
[Re: Drew]
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Hoosier_1960
Registered: 01/11/10
Posts: 5
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Check that your state has not disallowed the rewards program, as Indiana recently did. Scrooges.
Indiana 529 credit does not apply to rollovers
(July 2, 2009) - Indiana's 2009 budget specifies that rollover contributions into the state's 529 plan, and any contributions generated through a rewards program, are not eligible for the state tax credit on 529 contributions. The rule becomes effective January 1, 2010.
Mike
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#45761 - 01/28/10 03:56 PM
Re: 529 Credit Card Rewards - qualify as contribution for state tax deduction?
[Re: Hoosier_1960]
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bwilk
Registered: 05/14/01
Posts: 3321
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Then just get the rewards program to send the money directly to you and then deposit it in the account. I know you can do that with Upromise, not sure about the credit cards.
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#45764 - 01/31/10 11:54 PM
Re: 529 Credit Card Rewards - qualify as contribution for state tax deduction?
[Re: bwilk]
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AZcoyote
Registered: 01/24/10
Posts: 5
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Thank you all for your input. I wish there were a clear-cut answer, but alas, it does not appear to be so. (I will check to see if AZ has a position about rewards program contributions, Mike.)
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#45765 - 02/01/10 02:12 PM
Re: 529 Credit Card Rewards - qualify as contribution for state tax deduction?
[Re: AZcoyote]
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Drew
Registered: 01/09/00
Posts: 2868
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I would think that to discriminate among ones sources of funding for a 529 as to what counts and what doesn't count for a state tax break is an example of midget minds at work and might even have som eissues under the Federal Constitution's Commerce Clause if the impact was to discriminate essentially against out of sate funding sources--probably not worth the debate. If one state has mental midgets--so be it.
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Drew
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#45766 - 02/02/10 02:03 AM
Re: 529 Credit Card Rewards - qualify as contribution for state tax deduction?
[Re: Drew]
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AZcoyote
Registered: 01/24/10
Posts: 5
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I follow your line of thinking, Drew, and at first I didn't question the possibility of using my reward deposits for the state deduction. It is, after all, my money. ( bwilk -- this mastercard does not allow the option of taking the reward $ directly.) But then I realized that the program allows other people, such as family members, to assign their own reward $$ to my child's account. We (unfortunately!) don't have that situation, but if we did, I imagine we would only be allowed to use our own reward deposits for the tax deduction. That's what got me thinking -- maybe they aren't even eligible?
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#45767 - 02/02/10 02:18 AM
Re: 529 Credit Card Rewards - qualify as contribution for state tax deduction?
[Re: AZcoyote]
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AZcoyote
Registered: 01/24/10
Posts: 5
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I looked up the AZ tax instructions and it does not mention any restrictions,except that rollevers from one college savings plan to a different college savings plan do not qualify for the deduction. The instructions use the language "you may subtract amounts you contribute to 529 college savings plan ...."
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