Simple, right? The Plan offers several tax advantages that can help you save more for college, including:
- A special DC tax deduction. DC taxpayers can deduct up to $8,000 for married couples or domestic partners filing jointly, who have separate accounts, ($4,000 for individuals) when they contribute to their DC College Savings Plan account.1
- Tax-deferred growth. Earnings grow tax deferred from federal and District taxes.
- Tax-free distributions. Distributions for qualified expenses are exempt from federal and District tax.2
- Gift-tax benefits. Contributions qualify for the current federal $18,000 annual gift exclusion.
- Estate planning benefits. Reduce your personal taxable estate by making five years' worth of gifts (currently up to $90,000; $180,000 for married couples filing jointly) in one lump sum.3
1Contributions by DC taxpayers in excess of the annual limit may carry forward the excess of five (5) years and may be deducted in future years on their DC tax return. If a participant makes a non-qualified withdrawal or a transfer/rollover to another state’s program within two (2) years of opening the account, the amount of the deduction is “recaptured” and must be included in the participant's District of Columbia income.
2Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes and recapture of DC tax deductions. Tax and other benefits are contingent on meeting other requirements and certain withdrawals are subject to federal, state, and local taxes.
3In the event you do not survive the five-year period, a pro-rated amount will revert back to your taxable estate.