Can 2018 spring semester tuition (paid in December 2017) be qualified tax-free expense for an Coverdell ESA distribution in 2018?

The December 2017 payment was not claimed for any tax credit in 2017 tax return. Just want to know whether it qualifies for ESA distribution purpose.

Carl
Level 15

Education

Yes. Understand this when it comes to taxes and education.

- Scholarships, grants, 529 funds, etc, are claimed as taxable income (*initially*) in the tax year they are received. It does not matter what tax year that money is *for*.

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

Hal_Al
Level 15

Education

Sorry to give you conflicting info, but I believe the answer is no.
To be a qualified distribution, the money must be used to PAY qualified expenses, in the same year as the distribution. So, money paid in 2017 cannot be reimbursed by a 2018 distribution, even though the payment was for a 2018 term.
Carl
Level 15

Education

That's what I said. Nothing conflicting there. I just didn't clarify that 529 funds must be used to pay qualified expenses in the same tax year they are withdrawn.
So if you withdrew in 2017 and then used that money to pay qualified expenses in 2018 (regardless of what tax year was paid *for*), then the withdrawal is taxable on the 2017 return, and may also be subject to penalties on the 2017 return.
In order for a 529 withdrawal to be tax exempt, it must be used for qualified expenses in the same tax year it is withdrawn.