How do I claim the Vermont Income Tax Credit?
Participants paying Vermont taxes may be able to claim the Vermont state income tax credit for contributions made to a VT529 account. Said contributions may only be claimed by a single individual and may not be for a subsequent or future year.
Unsure how much you contributed during a certain tax year? Log in to view your Financial Statements, which include a transaction summary at the end of each quarter outlining the tax year for each contribution received during that time period.
On Schedule IN-119, VT Tax Adjustments and Non-Refundable Credits, enter the amount you contributed to VT529 during the tax year under Part II, VT Income Tax Credits, line 1, VT Higher Education Investment credit, and calculate the credit per the instructions. Note: FEIN if required for online filers is 030216589.
Enter your total tax credit amount (VT529 plus any other Vermont tax credits you receive) on IN-111, Line 19.
Paper filers may need to copy the annual VT529 statement and include it with forms when filing.
See the Vermont Official State Website for forms. For details and examples, including information on nonqualified withdrawals, see the Vermont Department of Taxes Technical Bulletin (TB-66).
Federal tax reform info: The Internal Revenue Code includes provisions related to 529 plan accounts. See the Disclosure Booklet [LINK] for details. In 2022, Vermont tax law was updated to add two new allowable uses of funds withdrawn from a VT529 account without adverse impact on the Vermont income tax credit: (1) for apprenticeship programs registered and certified with the U.S. Secretary of Labor and (2) for repayment of up to $10,000 per the lifetime of a beneficiary in student loans for post-secondary education at an approved postsecondary education institution. (See the VT529 tax credit information on the VT Tax website.) Vermont tax law currently does not treat a rollover to a Roth IRA or a withdrawal used for K through 12 education expenses as an allowable use. Please consult your tax advisor for how this may affect your personal Vermont tax situation.