topic Early 529 Plan distribution. in Education

Early 529 Plan distribution.

Doukastaxes — Sun, 07 Mar 2021 17:19:23 GMT

Due to a 12/30/20 withdrawal from a 529 plan needed to accommodate due date of my dependents Spring 2021 semester payment, the 1099-Q shows a distribution that is larger than education expenses for 2020. In effect, we took distributions for 3 semesters in 2020 and only paid 2. When the spring 2021 costs are introduced they far exceed the distribution as we are paying partially our of pocket.

How do we handle this when reporting the 1099-Q, the 1098-T and her other education expenses?

Re: Early 529 Plan distribution.

MaryK4 — Mon, 08 Mar 2021 01:36:38 GMT

You will have to add the 2021 Spring semester expenses (at least the amount that the 529 will cover) to your 2020 TurboTax information. Next year you will want to deduct that amount so it is not double counted.

In general, the designated beneficiary of a QTP can receive tax-free distributions to pay qualified education expenses. The distributions are tax-free to the extent the amount of the distributions doesn't exceed the beneficiary's qualified education expenses.