W. Va. Code R. § 112-20-16

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 112-20-16 - Qualified Expenses

16.1. The amount of any distribution that is used to pay for a qualified expense of the account's designated beneficiary establishes the account owner's entitlement to the personal income tax decreasing modification authorized by W. Va. Code § 11-21-12m(b) to the extent the distribution amount is not allowable as a deduction when arriving at the account owner's federal adjusted gross income. An account owner is responsible for maintaining documentation of qualified expenditures needed for state tax reporting or in the case of a state tax audit. The board will not collect or maintain documentation of an account owner's expenditures of moneys distributed to the account owner from a Jumpstart Savings account: Provided, That the board may request information on the use of distribution monies for the purpose of collecting program data.

16.2. The amount of any distribution that is used for qualified expenses is considered a qualified distribution. For the purposes of W. Va. Code § 11-21-12m and this rule, a qualified expense includes an account distribution, or any amount thereof, expended by an account beneficiary in the taxable year of receipt of the distribution or the next succeeding taxable year that:

16.2.1. Is allowable as a federal personal income tax deduction pursuant to 26 U.S.C. § 162, as an ordinary and necessary business expense, and is incurred in carrying on a qualifying profession;

16.2.2. Is allowable as a federal personal income tax deduction pursuant to 26 U.S.C. § 195(b), as a business start-up expenditure, and is incurred in carrying on a qualifying profession; or

16.2.3. Is expended for goods, services, or other expenses that qualify for a federal personal income tax deduction for depreciation or amortization over time, pursuant to a provision of 26 U.S.C. § 161-199a and that are used to carry on a qualifying profession; or

16.2.4. Is not allowable as any one of the federal personal income tax deductions described in subdivisions 16.2.1. through 16.2.3. of this subsection and is expended for:

16.2.4.a. The purchase of tools, equipment, or supplies used exclusively in a qualifying profession;

16.2.4.b. Costs to establish a business in this state to practice a qualifying profession; or

16.2.4.c. Fees for required certification or licensure in a qualifying profession: Provided, That in no event shall any dues, fees, subscriptions, or any other payments to a labor organization constitute qualified expenses for the purposes of this article; and

16.2.4.d. Is not reimbursed by the taxpayer's employer.

16.3. A distribution of funds from an account for any use other than qualified expenses for the designated beneficiary constitutes a non-qualified distribution and is not eligible for the state tax benefits provided in W. Va. Code § 11-21-12m and is subject to an increasing modification for distributions not used for qualified expenses pursuant to W.Va. Code § 11-21-12m(c). Any expense that does not meet the definition of qualified expense provided in section 16.2. of this rule is a non-qualified expense. Examples of non-qualified expenses include, but are not limited to, dues, fees, subscriptions, or any other payments to a labor organization; bad debt expenses; campaign donations; lobbying expenses; payment of federal or state property, income, or corporate taxes; payment of civil or criminal fines; the purchase of tools, equipment, or supplies for personal use; or costs to establish a business with its principal place of business located outside of the State of West Virginia.

W. Va. Code R. § 112-20-16