Virginia's Internal Revenue Code Section 529 plans offer special tax advantages for account owners over age 70. When opening an account for an eligible beneficiary in any of our four programs (VPEP, VEST, CollegeAmerica or CollegeWealth), those age 70 and older may deduct the entire amount contributed to an account at one time, or deduct the entire contribution in any future tax years. They may also choose to take advantage of a five-year averaging provision for federal gift tax purposes that is available for 529 college savings contributions.

Grandparents also may contribute to a new or existing account owned by someone else but only the account owner is eligible for the Virginia state tax deduction. For those under age 70, the state tax deduction is up to $2,000 a year per account with an unlimited carryforward until all contributions have been deducted.

Contributions to a 529 account must be counted toward your $12,000 annual federal gift tax exclusion. This means that a contribution to any one beneficiary's account in a single tax year that is greater than $12,000 ($24,000 for married couples) could have federal gift tax consequences. You must also take into consideration additional gifts, if any, you make to the same beneficiary during the same year.

More detailed information on the federal gift and estate tax provisions can be found in each plan's Disclosure Statement.

Click here [PDF document, 85kb, opens in new window] to see the VPEP Disclosure Statement.

Click here [PDF document, 815kb, opens in new window] to see the VEST Program Description.

And be sure to consult your tax adviser or the Internal Revenue Service for information on how to document any elections that you make. Usually, these elections require that you file an IRS Form 709.

In addition to these Virginia and federal tax advantages, remember that withdrawals also are tax free as long as they are used for qualified higher education expenses.