The Jumpstart Savings Program offers unique state tax benefits for West Virginia taxpayers. The tax modifications and credits described below are state tax benefits only, and in no way will diminish or otherwise impact any person’s federal tax liability or tax liability in a state other than West Virginia.
Please note: The following information is no substitute for professional tax or legal advice. All Account Owners and Program Participants should consult with a qualified tax professional and/or legal professional before opening an Account, completing any transaction involving an Account, or participating in the Program. Individuals and persons claiming tax modifications and/or credits are responsible for their own tax reporting and for maintaining sufficient documentation of Program transactions for tax reporting and tax audit purposes.
Contributions and Distributions
An individual’s contribution to a Jumpstart Savings Account may be used to reduce his or her West Virginia taxable income for the year in which the contribution was made. A taxpayer may not claim this benefit in an amount exceeding $25,000 in any given taxable year, but the taxpayer may elect to carry forward this benefit over the next five taxable years. Jumpstart Savings Account contributions do not reduce or otherwise impact federal tax liability.
Distributions from Jumpstart Savings Accounts can only be taken by Account Owners and Account Owners are the only individuals that can claim the corresponding tax benefits. A distribution may be used to reduce West Virginia taxable income, in an amount equal to the portion of an Account distribution that was used to pay for Designated Beneficiary’s qualified expenses in the taxable year in which the distribution was made. A taxpayer may not claim this tax benefit in an amount exceeding $25,000 in any given taxable year, and there is no carry forward permitted for this benefit. Jumpstart Savings Account distributions do not reduce or otherwise impact federal tax liability.
A qualified expense is an expenditure of Jumpstart Savings Account funds used to cover the Designated Beneficiary’s costs for (1) tools, supplies, and equipment; (2) licensing and certification fees; and (3) business start-up costs used exclusively in a qualifying occupation, profession, or trade.
A “qualifying occupation, profession, or trade” is an occupation, profession, or trade for which the Designated Beneficiary is required to: 1) Complete an apprenticeship program registered and certified with the United States Department of Labor; 2) Complete an apprenticeship program required by state law; 3) Earn an associate degree or certification from a community and technical college; or 4) Earn a license or certification from an ACE career center.
Jumpstart Savings Program tax advantages only apply to West Virginia taxes. At this time there are no federal tax benefits associated with the Jumpstart Savings Program.
Rollover Benefits for State Taxes Only
Rollover to ABLE benefit: A modification reducing West Virginia taxable income, in an amount equal to the portion of a distribution from a Jumpstart Savings Account, distributed to the taxpayer in the taxable year, that the taxpayer deposits into a West Virginia ABLE Account within 30 days of receiving said distribution.
SMART529 rollover benefit: A modification reducing West Virginia taxable income, in an amount equal to the portion of a distribution from a West Virginia SMART529 account, distributed to the taxpayer in the taxable year, that the taxpayer deposits into a Jumpstart Savings Account within 30 days of receiving the distribution. Any nonqualified distribution from a SMART529 account may be subject to federal taxes and federal tax penalties.
Employers may be eligible in accordance with statutory requirements for a non-refundable tax credit of up to $5,000 per taxable year, against either income tax or corporate net income tax for direct contributions into a Jumpstart Savings Account, if the employee is a West Virginia resident and the Designated Beneficiary for the Account.
Distributions for non-qualified expenses are not eligible for any of the state tax modifications described above.