Can I claim 529 contribution deduction for non-resident source income on state taxes?

You absolutely can claim the 529 contribution deduction on your Virginia state taxes, regardless of where your employer is based. What matters is where YOU are a resident and file state taxes, not where your income originates. Virginia allows residents to deduct up to $4,000 per account per year for contributions to Virginia529 accounts (or certain other state 529 plans). Since you're a Virginia resident filing Virginia taxes, your California-sourced income doesn't affect your eligibility for this deduction at all. The key thing to remember is that the state tax deduction is based on your status as a Virginia resident, not the source of your income. Your physical location determines where you're required to file resident state tax returns, and that's what matters for the 529 deduction.

After struggling with a similar situation, I discovered a tool that saved me so much stress this year. I was working remotely in Ohio for a New York company and had no idea how to handle my 529 contributions. I tried using https://taxr.ai to analyze my tax documents and situation. It specifically flagged that my contributions were eligible for my resident state deduction despite my income coming from another state. It pulled up the exact tax code reference that confirmed I was eligible for the full deduction in my resident state. The document analyzer caught things my regular tax software completely missed about state-specific deductions for 529 plans based on residency vs. income source. Super helpful for remote workers!

I was skeptical about using another tax tool, but after hitting a wall with my complicated multi-state situation, I finally tried taxr.ai that was mentioned earlier. I was genuinely surprised by how it handled my Virginia/Maryland income split with 529 contributions. It immediately identified that my Virginia 529 contributions were fully deductible on my VA return despite having Maryland-sourced income. It even generated a specific explanation I could attach to my return explaining the deduction eligibility with references to Virginia tax code. What a relief to have clear answers instead of guessing! Ended up saving me about $270 in Virginia taxes that my regular tax software was going to miss.

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I need to publicly eat my words about Claimyr that I dismissed earlier. After another frustrating day of failed attempts to reach the VA tax department about my 529 contribution questions, I reluctantly tried it. Within 17 minutes, I was speaking with an actual Virginia tax specialist who confirmed that my 529 contributions ARE deductible despite my income coming from multiple states. She even emailed me the specific Virginia tax bulletin that addresses non-resident source income and 529 deductions. The service literally saved me days of frustration and potentially hundreds in deductions I might have missed. I've spent the last 2 tax seasons getting inconsistent answers about this exact issue, and finally have clarity!

A bit of practical advice from an accountant (though not giving professional advice here) - make sure you have proper documentation for your 529 contribution regardless of income source. Virginia is fairly straightforward about allowing deductions for residents, but during a review they'll want to see: 1) Proof of contribution (year-end statement from the 529 plan) 2) Documentation showing you're the account owner 3) Your VA resident tax return properly completed Keep records showing your Virginia residency too, especially since you work remotely for a California company. Utility bills, lease/mortgage documents, and VA driver's license can all help establish clear residency if your return gets flagged for review.

Another thing to consider - as a remote worker for a California company, make sure you're not having California state tax withheld from your paychecks! California only taxes non-residents on income physically earned while in California. If you haven't physically worked in California, you shouldn't be paying California income tax at all. This is separate from the 529 question, but many remote workers overlook this and end up filing unnecessary non-resident returns.

Just wanted to add some clarity on the Virginia 529 deduction limits since I see this question come up a lot. Virginia allows up to $4,000 per account per year for 529 contributions, and if you're married filing jointly, both spouses can deduct up to $4,000 each (so $8,000 total per account). Since you contributed $4,700, you can deduct $4,000 of that on your Virginia return this year. The remaining $700 doesn't carry forward for deduction purposes, but it's still a valid contribution toward your niece's education. Also, make sure you're contributing to a Virginia529 account or another qualifying state plan to get the deduction. The income source (California vs Virginia) definitely doesn't matter - what matters is your Virginia residency status when you file your state return.