529 QUALIFIED EDUCATION EXPENSES IRS PLUS
529 QUALIFIED EDUCATION EXPENSES IRS FREE

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.

529 QUALIFIED EDUCATION EXPENSES IRS PLUS

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. 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.' A qualified tuition program (QTP), also referred to as a section 529 plan, is a program established and maintained by a state, or an agency or instrumentality of a state, that allows a contributor either to prepay a beneficiary's qualified higher education expenses at an eligible educational institution or to contribute to an account for paying.

529 QUALIFIED EDUCATION EXPENSES IRS FREE

'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. Withdrawals from state college savings and prepaid programs, known as section 529 plans, to pay qualified higher education expenses will be free from federal. 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.

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. 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. Before enrolling in a 529 plan, its important to know. 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. As tuition costs continue to rise, contributing to an IRS 529 plan can help offset future expenses. 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.

529 qualified education expenses irs