IDeal is Idaho’s official 529 college savings program, created as a qualified tuition program under Internal Revenue Code section 529.
IDeal helps families save money for education expenses through an Idaho 529 account. Eligible expenses include K-12 tuition, apprenticeships, trade schools, and higher education costs such as tuition, mandatory fees, room and board, books, supplies, computer software, and internet access, as well as limited student loan repayment. IDeal can be used wherever the student is – not just in Idaho.
Each 529 account has an account owner and a designated beneficiary. The owner is the person who opened the account. The beneficiary is the student receiving benefits from the account. You can open an account to pay for your own higher education or for someone else’s. Any U.S. citizen or resident alien, 18 or older, can open an account.
Anyone, including family and friends, can contribute to an Idaho college savings program. Contributions to an Idaho 529 account provide a tax benefit. IDeal’s “Quick Facts on 529s” explains more about the features of a 529 plan.
Idaho College Savings Program tax deduction
If you contribute to an IDeal account, you can claim an Idaho income tax deduction of up to $6,000 per year with the filing status of single or head of household or up to $12,000 with the filing status of married filing jointly. You can subtract the contribution from your Idaho taxable income even if you don’t itemize.
Claim the deduction on Idaho Form 39R (for Idaho residents) or Idaho Form 39NR (for nonresidents and part-year Idaho residents). You only get the deduction if you file an Idaho income tax return.
- You must contribute on or before December 31 of a calendar year for it to be deductible in that taxable year.
- You can’t take the contribution as a federal income tax deduction.
- Neither Idaho nor the federal government will tax the amount the account earns while the funds remain in the account.
- Contributions to a 529 program that a state other than Idaho administers aren’t eligible for a deduction on the Idaho return.
- Gift tax can apply to 529 contributions.
Employer tax credit
Employers who contribute to their employees’ IDeal – Idaho 529 College Savings Program accounts receive an Idaho state tax credit. The credit is 20% of the employer’s contribution, capped at $500 per employee per year.
Employer contributions to an employee’s 529 account count as additional income for the employee. Contributions appear as income on the employee’s W-2 and are subject to taxes and withholdings. Employees can deduct employer contributions made on their behalf from their Idaho state income tax.
Qualified withdrawals
You can use qualified withdrawals from a 529 account to pay for the following expenses (see Internal Revenue Code 529(e)(3)):
K-12. Any public, private, or religious school:
- Tuition payments up to $10,000 per year per student.
Higher education. You can use 529 funds at any higher education institution in the country, not just Idaho, including:
- Two or four-year colleges or universities.
- Vocational/technical schools.
- Career retraining schools.
- Dual credit courses.
- Graduate schools.
Eligible higher education expenses include:
- Tuition and fees for students attending higher education.
- Books, supplies, and equipment.
- Expenses for special-needs services for a special-needs beneficiary incurred in connection with enrollment or attendance at an eligible educational institution.
- Expenses for room and board for students enrolled at least half-time. The expenses for room and board qualify only to the extent that they aren’t greater than the following two amounts:
- The allowance for room and board, determined by the eligible educational institution, included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.
- The actual amount charged if the student is residing in housing that the eligible educational institution owns or operates. Contact the educational institution for qualified room and board costs.
- The purchase of computer or related peripheral equipment, computer software, or internet access and related services, if the beneficiary will use them primarily during the time they’re enrolled at an eligible educational institution. (This doesn’t include expenses for computer software for sports, games, or hobbies unless the software is predominantly educational.)
Apprenticeship programs. Expenses required for participation in a program registered and certified with the Secretary of Labor under the National Apprenticeship Act.
Student loan repayments. Principal or interest on any qualified education loan of the beneficiary or a sibling of the beneficiary, up to $10,000 per individual.
Note: If a beneficiary doesn’t use the money in a 529 account, the account owner has options:
- Let the account continue to grow tax deferred.
- Change the beneficiary by transferring it to a family member of the current beneficiary.
- Roll over the 529 funds into a Roth IRA. The account must be open for at least 15 years.
- Take a taxable, non-qualified withdrawal (see below).
Non-qualified withdrawals
If you withdraw money from a 529 account and don’t use it to pay for qualified education expenses of the designated beneficiary, the recipient of the money must add all amounts withdrawn to their Idaho taxable income (if not included in federal adjusted gross income) in the year of the withdrawal. This addition to Idaho taxable income may include amounts contributed to the account, as well as earnings.
The recipient makes the addition on Idaho Form 39R (for Idaho residents) or Idaho Form 39NR (for nonresidents or part-year residents of Idaho).
A non-qualified withdrawal is an account withdrawal that isn’t one of the following:
- A qualified withdrawal (see above).
- A withdrawal paid to a beneficiary of the beneficiary (or the estate of the beneficiary) on or after the death of the beneficiary.
- A withdrawal due to the disability of the beneficiary.
- A withdrawal because the beneficiary receives a qualified scholarship or tuition assistance, if the withdrawal doesn’t exceed the amount of the scholarship or tuition assistance.
- A withdrawal due to the use of education credits as allowed under federal income tax law.
- A refund from an eligible educational institution that’s re-contributed to a qualified tuition program if the re-contribution is made no later than 60 days after the date of the refund and doesn’t exceed the refund amount.
Note: We’re in the process of updating Tax Consequences of Federal and Idaho College Savings Program Withdrawals, a document that provides more examples of when a recipient must add account withdrawals to Idaho taxable income.
Rollovers to another qualified tuition program
If you roll funds from an Idaho college savings account to a qualified program that another state or qualified ABLE program operates, you must make an addition to your Idaho taxable income. The amount added back is limited to your contributions deducted in the year of transfer and the prior tax year.
Other tax incentives for higher education
Some federal tax credits and deductions might be available if you’re saving for or paying higher education costs. Review IRS Publication 970.
For more information
For more information about qualified tuition programs, see IRS Publication 970.
For more information about the Idaho College Savings Program, visit IDeal’s website or call (866) 433-2533.
An available disclosure statement describes investment objectives, risks, charges, expenses, and other important information. Because investing in IDeal is an important decision for you and your family, you should read and consider the statement carefully before investing.
The College Savings Program Board administers IDeal. Ascensus Broker Dealer Services LLC (ABD) is the distributor of IDeal. ABD, the program manager, and its affiliates are responsible for day-to-day operations, including investment advisory, recordkeeping, and administrative services.