![]() If you withdraw the money in December for a tuition bill that isn't paid until January, you risk taking a taxable withdrawal because you didn't have sufficient qualified education expenses during the year of withdrawal. So although you won't find a rule on this explicitly stated anywhere in IRS publications or tax forms, the prevailing view by tax professionals is that 529 withdrawals must match up with the payment of the qualifying expenses in the same tax year. The IRS and Treasury Department are now proposing to develop a new rule permitting recipients of 529 plan distributions to count only those qualifying expenses paid during the same calendar year as the distribution, plus expenses paid within the first three months of the following year. ![]() Distributions to pay K-12 tuition or qualified education loan repayments are considered nonqualified withdrawals for New York State tax purposes and will. Concerns have been raised that individuals could allow the account to grow indefinitely on a tax-deferred basis before requesting reimbursement or use distributions in earlier years to pay QHEEs in later years." To qualify for New York State tax-free withdrawals on earnings, the money must be used for qualified higher education expenses for the beneficiary at an eligible educational institution. "Section 529 is silent regarding whether distributions must be made from a section 529 account in the same tax year as QHEEs (qualified higher education expenses) were paid or incurred. But it approached the topic when it published Announcement 2008-17 in January 2008, which stated in part: The IRS hasn't specifically said yes or no to that issue. Essentially, the school sets a budget or allowance for room and board, referred to as the cost of attendance. However, housing is one of many expenses that are subject to a reimbursement limit. Surprisingly, the actual tax rules contained in section 529 and IRS Publication 970 don't spell out that the timing of expenses and distributions must match up in the same tax year. In general, you can use 529 funds to pay for your student’s off-campus housing costs. For students pursuing a degree on at least a half-time basis, QEEs also include a specified amount of room and board.īecause the current rules don't specify a deadline or age as to when money in a 529 plan must be distributed, people who've stashed a considerable amount of money in these accounts are well advised to keep it there and growing tax-deferred as long as possible. ![]() QEEs include tuition, fees, books, supplies and equipment. The SECURE Act allows families to take tax-free 529 plan distributions to pay off student loans.Both principal and interest payments toward a student loan are considered qualified education expenses. Simply put, withdrawals from 529 Plan accounts can be tax-free when the money is used to pay for Qualified Education Expenses, or QEEs, as specified in IRS Publication 970. Use the money to make student loan payments. Investment growth on money saved in these accounts is tax-free when withdrawn for specific expenses relating to a child's education. Donald Trump claims huge net worth, and other MoneyWatch headlines 01:05Ĭollege savings plans known as 529 accounts have earned widespread appeal among parents and families saving for a child's future education costs because they come with powerful tax advantages.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |