Deduct up to $4,000 per year, per account from Virginia taxable income
All VPEP account owners who file Virginia income tax returns can deduct contributions from their Virginia taxable income up to $4,000 per year ($2,000 prior to 2009), per account. For larger contributions, Virginia provides an unlimited carry forward until the full price of the contract has been deducted.
The $4,000 annual cap does not apply to VPEP account owners who are age 70 or above. They may deduct the entire amount contributed at one time or in any future tax years.
If you are not a Virginia taxpayer, please consult a tax adviser or your state's department of taxation to determine your state's tax treatment of a Virginia 529 account.
There is no federal tax on any interest on the increased value each year
Any earnings on VPEP contracts grow tax free at the federal level, which means that the account owner does not have to pay federal tax on any interest on the increased contract value each year. If the contract is used for qualified higher education expenses, the difference between the purchase price and the amount paid out by VPEP (the earnings) is tax free.