What do you do if you have a withdrawal from a 529 that was made at the very end of the year in 2024, but was used to pay for education expenses in early January 2025? This seems to be making our taxes owed extremely high this year, which was unexpected because we thought withdrawals from a 529 were always tax free as long as they are used to pay for education expenses.
Here is the factual scenario: We made two withdrawals from our 529 account in 2024 in order to pay for our child's education expenses (tuition, room & board, books, etc.).
- One withdrawal from the 529 was made in 9/2024 and that was used to pay for child's fall tuition, room & board, etc. that same month.
- The second withdrawal from the 529 was made when we received the bill for our child's tuition for winter term (withdrawal made on 12/30/24). We paid her tuition bill for winter term on Jan 2, 2025.
Our 1099-Q includes the total amount for both withdrawals form the 529 in box 1. Our 1098-T only includes amounts paid to the university in 2024.
