My state (Massachusetts) will offer a tax deduction next year for up to $2000 in deposits to a 529 college savings account.

I have a credit card which offers 2% cash back. The choices were to have the funds go to an IRA, regular brokerage account, or 529 account. I chose the 529.

Now, when I file in 2018 (for 2017 deposits), will I have an issue taking this deduction? If yes, I can simply switch to have the money run through my account, and deposit to the 529 with my own check. Seems silly to have to do that.

1 Answer 1


The way deductions work normally does not take into account what account the transaction was made using. I.e. you report your gross income, your deductions and they subtract the deductions from the income. What's left is your taxable income.

The tricky part comes with pre-tax contributions to tax advantaged accounts (like 401(k)). Those plans require the contributions to be made by your company. Since contributions to 529 plans are not deductible on your federal income taxes, the money is not going to be directly deposited.

So it does not matter how the money goes into the plan. Just make sure you keep a record of your contributions.


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