The best 529 plan for Wisconsin residents depends on how you want to invest funds for your child or other beneficiary. Students may attend any college or university in any state regardless of any investment in the Wisconsin 529 plan. For example, you can save in a Wisconsin 529 plan and your daughter can go to Duke and your son can go to Stanford. Likewise, you do not have to use the Wisconsin 529 plan even if you live in Wisconsin. However, you may not get the state tax benefits from a plan managed by a different state.
Tomorrow’s Scholar Wisconsin 529 Plan Option
The Tomorrow’s Scholar plan is offered by Voya and it offers 3 ways to invest.
- Invest by age – the portfolio automatically adjusts to be more conservative, the older the beneficiary gets.
- By Risk Level – You tell them how risky you would like the investments to be, and they automatically set up the portfolio and keep it at your risk tolerance.
- Build Your Own Portfolio – There are 18 investment options that you can use to customize your own investment strategy.
Edvest Wisconsin 529 Plan Option Details
The Edvest Wisconsin 529 Plan investment options.
- Enrollment Year Portfolio – Automatic investment option based upon the year the beneficiary is expected to need the funds.
- Multi-Fund Portfolios – Portfolios made of index funds or actively managed mutual funds tailored for risk
- Single Investment Portfolios – Invest all in various categories like Large Cap stocks and Social Choice Portfolio
- Principal Plus Interest Portfolio – A glorified money market account
Find out about the Colorado 529 plan here.
Wisconsin Taxes 529 Plans
Wisconsin 529 plan contributions are not tax-deductible on federal income taxes.
The maximum contribution limit for a Wisconsin 529 plan state tax deduction is $3,380 for a single beneficiary in the tax year 2021. The maximum contribution deduction in 2022 is $3,560 for a single beneficiary. There is no limit on the number of beneficiaries that can be designated on a single account. There is also no limit on the number of accounts that can be established for a single beneficiary.
The account management fee for the Wisconsin 529 plan is $25 per year. There is no fee for account holders who are residents of Wisconsin.
The designated beneficiary of a Wisconsin 529 plan account may be changed at any time. There is no limit on the number of times a beneficiary can be changed.
Withdrawals from a Wisconsin 529 plan are tax-free as long as they are used for qualified educational expenses. Qualified educational expenses include tuition, fees, books, supplies, equipment, and room and board for a beneficiary who is enrolled at least half-time in a degree, certificate, or other program leading to a recognized educational credential at an eligible educational institution. Non-qualified withdrawals are subject to federal and state income taxes and may be subject to a 10% federal penalty tax.
American Opportunity Tax Credit (AOTC)
Don’t forget that regardless of any savings you may have in a 529 plan or otherwise, you or your child may qualify for the American Opportunity Tax Credit, or AOTC. The credit is up to $2,500 per student during the first four years of higher education. You qualify even if you are an older non-traditional student as long as it is your first four years at a higher education program. You can even get up to $1,000 as a refund even if you do not have enough income to pay taxes. This is known as a refundable tax credit.
You must file a tax return to claim the credit. Report the information you receive on Form 1098-T from your university or college.
