I withdrew 529 funds in 2018 for 2019 tuition--how do I show that the funds were used for qualified expenses?

[ekcasto]

The 1098 form lists only the 2018 tuition. Since I paid for both terms (fall 2018 and winter 2019), it looks as though I deducted too much from the 529.

[Carl]

Understand this:

 - Qualified education expenses are claimed in the tax year they are paid. It flat out *does* *not* *matter* what year you paid *for*.

So if you withdrew 529 funds in 2018 "and" used every penny of those funds to pay for qualified education expenses in 2018, then you're good.

529 funds can be used to pay for the qualified education expenses of tuition, books, and lab fees. Additionally unlike scholarships and grants, 529 funds can also be used to pay for the allowed but unqualified expenses of room and board, *provided* that room and board was in direct support of the education.

If that doesn't help clear things up a bit for you, just let me know where you still need clarity, and I'll be happy to provide it.

[ekcasto]

Unfortunately, the 1098T from the college shows only 2018 tuition, so it looks as though I withdrew too much. Also, even though the 529 plan sent the money directly to the bursar of the college, my son is listed as recipient. How do I show that the money was actually used for tuition?

[ekcasto]

That is, how do I show Turbo Tax? It thinks the money is taxable, simply based on the forms.

[Carl]

If you have receipts to prove you paid it in 2018, then it flat out does not matter when the college may have credited the payment. Enter the 1098-T "exactly" as printed. Then follow up screens allow you to enter data that was not included on the 1098-T. That should take care of it if you did "in fact" withdraw the funds in 2018 "and" pay qualified/allowed expenses with those funds in 2018.

[baxvobiscum]

I DIDN'T pay it in 2018...we received a distribution on 12/24/2018 and the school was paid from that distribution on 1/8/2019...it looks like I'm in trouble...how to fix?????

[Carl]

There's nothing to fix, because there's nothing broke. The 1099-Q distribution is taxable income in 2018. Plain and simple. Then for 2019, that money is considered pocket money. So for 2019 you will claim to have used that money to pay "out of pocket" qualified education expenses with. If (and only if) congress renews the out of pocket expenses deduction, you can then deduct it from your taxable 2019 income.