Answers to your crisis questions
With the economy and the market floundering, you need Money's help more than ever. Our experts are on the case.
Can I take a tax loss from a 529 plan?
Carolyn Bigda, Staff writer
Answer: It's possible to harvest tax losses in a 529 plan, but tricky. First, you have to close the account entirely, not just sell a fund within the plan. Second, because 529 losses fall into the category of miscellaneous deductions, you can deduct only those losses that exceed 2% of your adjusted gross income. Finally, you may be on the hook to repay any state tax deductions that you took on the contributions.
As a result, you are probably better off staying put. Because your kids are young, you have time to make up for losses. If you pull out now, you may miss a rebound.
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Last updated December 26 2008: 9:20 AM ET
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