WD from 2 kids 529. One WD is higher to cover more than 1 kid. Why is TT put the kid’s higher 529 WD as other income instead of apply the extra to the other kid?

[michash2998]

How to enter this in TT to avoid the problem?

[JohnB5677]

Let me make sure I understand.

• You have 2 children.
• I'm guessing that you would have (2) 529 college savings plans.
• I think you are suggesting that one withdrawal was larger, but wasn't used by that beneficiary child, so you want to apply it to the other child.

The 529 plan has one specific beneficiary assigned to the plan.  

• All of the proceeds from that plan are attributed to that beneficiary.
• You can switch beneficiaries to another family member or relative as defined by the IRS, but only the existing beneficiary can use the funds for education.

"The person who opens the 529 plan account is called the account holder or the saver. The person the account is opened for is called the beneficiary or the student. The account holder and the beneficiary can be the same person."

10 Questions to Consider Before Opening a 529 Account

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[Hal_Al · Accepted solution]

Q.  Why is TT put the kid’s higher 529 WD as other income instead of apply the extra to the other kid?

A. Because that's not allowed. 

The part you want to apply to the other kid, is an excess (non qualified) distribution.  The earnings portion of the excess is technically taxable. 

In the future, to do what you want to do, you must first transfer (rollover) money from one kid's account to the other. You are limited to one rollover per year (within a 12 month window).

[michash2998]

That’s a bummer.  the websites I read said I can use 529 acct from one kid to pay for the other kid but didn’t mention I have to transfer between accounts first.  Is that anything I can do as the money are used 100% for qualified expenses?  Thanks

[AmyC]

I don't know of a way you can retroactively roll over the money. Chalk this up to a learning lesson. Here is guidance: Pros and Cons of Opening a 529 Plan for Each Child. This includes: You may use a single 529 plan account to save for more than one child as long as you change the beneficiary when it's time to pay for your next child's college expenses — at no cost. In most cases, it makes sense to have a separate 529 for each child, but some parents may prefer to use a single plan.