Kid started at a university and the first semester bill has been paid from our bank account (deadline snuck up on us). What do y'all recommend as a strategy to withdraw from 529 for what we have paid? Wait till December or withdraw as you go?
Reading online I am aware that I should make 529 withdrawals in the same year as the expenses were incurred.
There are items such as parking etc. that may not be eligible. Univ says 1098-T will be available by January 31st.
Posted by tamudude
3 Comments
I do it as we go, each semester, to ensure the same year. I have a google sheet & drive folder that I share with my college student to help track expenses (qualified vs non qualified) and scholarships since some of that can be taxable income depending on how it’s applied. She uploads invoices/receipts and I xfer from 529 to her account so she can pay for everything. If we get too close to deadlines, then I xfer from my bank acct to hers (real time). She pays school, I schedule 529 withdrawal to her, she reimburses me with bank acct xfer.
BTW – qualified vs non qualified mean different things depending context. Meals and housing are qualified for 529 but non qualified for scholarships/IRS.
It’s probably better to withdraw it as close as possible to the spend so that it’s more clear with respect to intent.
The other thing to remember is that the tuition deadlines can be somewhat flexible depending on the college. This is especially true since some 529 plans insist on sending physical checks. At least, they did when my kids were in college. There were a couple times that payments didn’t get recorded in their student accounts until a few days after the deadline but the kids never faced any impacts. For my kids, we also had them take the subsidized loans they were eligible for the first couple years so we had to wait for those to be credited before we knew the exact balance to pull from their 529s. The schools weren’t like angry landlords… they want the kids to be there so they’ll give you some grace.
And start looking for that Spring bill in early December. My younger son’s college put theirs out by Dec 15th every year. My older son’s school put theirs out in January though.
Oh, and enjoy that American Opportunity Credit on your taxes (assuming you will claim your student). It’s per student and my kids were 4 years apart so I got to claim it for 8 years… 🙂
You can reimburse yourself for the payment.