Q. I want to prepay a calendar year of tuition, so pay all of calendar 2022, in December of 2021. I will also withdraw the funds from a 529 in December of 2021 to fund this prepayment. I assume I won’t be harassed by the IRS as all the funding is going to qualified expenses. Sound right?
A. Probably, but I haven't seen that specific question, before now. Publication 970 makes it clear that you cannot prepay (except for an academic period starting in the 1st 3 months of 2022) tuition and claim a tuition credit or deduction in 2021. The section on QTPs (529 plans) does not contain a similar rule. It does state that distributions must be taken in the same tax year in which the qualifying expenses are paid.
