529 distributions for attendance at a university in Europe

Forum|Forum|2 years ago
September 25, 2023
4 replies
45 views

During the last 20 years, I contributed $25,000 to a 529 account for my son. Its current value is $75,000.

He is interested in going to a university in Europe.

Let's assume that all of his educational expenses would not be 529-eligible.

If he sent me receipts for his unqualified educational expenses and I reimbursed him from his 529 account, is he responsible for any penalties and taxes, or am I?

Regardless, could I include in the distribution an amount to cover the anticipated penalties and taxes and the penalties and taxes on the penalties and taxes included in the distribution?

Thanks.

Not A Product Question

Best answer by Hal_Al

Q. If he sent me receipts for his unqualified educational expenses and I reimbursed him from his 529 account, is he responsible for any penalties and taxes, or am I?

A. It's your choice, but you have to decide before you ask the 529 plan administrator to make the distribution. You may designate that they send the money to you or him.

For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q. The 1099-Q gets reported on the recipient's tax return. The recipient's name & SS# will be on the 1099-Q.

Some foreign schools are eligible educational institutions.

See if your school is on the U.S. Department of Education’s Database of Accredited Post Secondary Institutions and Programs (DAPIP) or the Federal Student Loan Program list. (from IRS web site)

NCperson

Level 15

@QRFMTOA - you are responsible since you own the 529 ( your son is a beneficary). any tax or penalties goes on your tax return.

Simply, whatever EARNINGS are dsitributed are subject to tax and penalties, unless there are "Qualified Higher Education Expenses" that support the distribution.

look at the link below - page 50 right side. - for a list of what qualifies, which are slightly different and more liberal than Qualified Educational Expenses" (QEE used for AOTC and LLC credits)

https://www.irs.gov/pub/irs-pdf/p970.pdf

Hal_Al

Answer

Level 15

Q. If he sent me receipts for his unqualified educational expenses and I reimbursed him from his 529 account, is he responsible for any penalties and taxes, or am I?

A. It's your choice, but you have to decide before you ask the 529 plan administrator to make the distribution. You may designate that they send the money to you or him.

Some foreign schools are eligible educational institutions.

See if your school is on the U.S. Department of Education’s Database of Accredited Post Secondary Institutions and Programs (DAPIP) or the Federal Student Loan Program list. (from IRS web site)

QRFMTOAAuthor

Level 5

@Hal_Al

Hal_Al,

You have always been incredibly helpful.

Thanks!

QRFMTOA

QRFMTOAAuthor

Level 5

@Hal_Al

@NCperson

@QRFMTOA wrote:
If he sent me receipts for his unqualified educational expenses and I reimbursed him from his 529 account, is he responsible for any penalties and taxes, or am I?

Sorry, I should have been more clear. The question above should have read...

If he sent me receipts for his unqualified educational expenses and I requested the plan administrator send a disbursement check directly to him, is he responsible for any penalties and taxes, or am I?

Sorry for the ambiguity.

QRFMTOA