DavidD66
Expert Alumni

Education

529 plan distributions must be made during the same tax year that the qualified expenses are incurred.  Unlike the American Opportunity Tax Credit (AOTC), taxpayers cannot anticipate qualified 529 plan expenses that will be made at the beginning of the next tax year. The Internal Revenue Code of 1986 has an explicit exception for the AOTC at 26 USC 25A(g)(4) that allows one to make a prepayment for expenses for an academic period that begins during the first three months of the next tax year. There is no similar statutory language for 529 plans.

 

Unless you have education expenses you can apply towards the 2020 distribution, a portion of the distribution may be taxable and subject to penalty.  

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