topic 529 excess withdrawal in Get your taxes done using TurboTax

529 excess withdrawal

enfiteosis — Fri, 07 May 2021 20:24:02 GMT

Hi, I withdrew my entire 529 to my college in 2020, which was a couple thousand over the educational expenses for the two remaining semesters (I graduate in May 2021). The college returned the excess money in 2021.

Do I pay taxes on this excess withdrawal for the year 2020 or 2021?

Re: 529 excess withdrawal

AmyC — Tue, 11 May 2021 20:23:00 GMT

Not if the money was used on qualified expenses, like room and board or other educational requirements. See page 52 for qualified distributions at IRS Publication 970, Tax Benefits for Education.

Re: 529 excess withdrawal

enfiteosis — Thu, 13 May 2021 01:53:09 GMT

Hi Amy,

In 2021, I have spent a few thousand dollars on housing and food while enrolled, which could probably cover the excess withdrawal.

However, I withdrew and made the payment to the college in 2020 and they only returned it in 2021. How would this work?

Re: 529 excess withdrawal

AmyC — Sun, 16 May 2021 18:50:00 GMT

If a college returns money, it is recommended to roll it back into the 529. Your case is off since you are graduating and should have more income for 2021 and possibly no tuition.

2020- you had qualified distributions so 1099-Q is not taxable. Does not even have to be entered but can be after the 1098-T and expenses are entered.

2021- college returned some money, this could be under the scholarship box 5 next year, which would make it taxable unless it it smaller than box 1.

Congratulations on graduating!