topic Deducting college expenses now or later - 529 plan in Education

Deducting college expenses now or later - 529 plan

tiny68 — Tue, 16 Mar 2021 22:10:37 GMT

My son is in health related graduate program (pharmacy). According to his 1098-T for 2020, his tuition was $23k last year and he had $9.8k in scholarships. We did not pull funds from his 529 plan to pay this last year because there wasn't enough left to cover the entire years cost. We plan to use the balance of his 529 plan to cover student cost once he graduates. Will we be still be able to use the balance of the 529 funds to cover his student loans once he finishes?

Re: Deducting college expenses now or later - 529 plan

MaryK4 — Tue, 16 Mar 2021 22:33:20 GMT

Yes, Under the SECURE Act of 2019, plan holders can use 529 plans to pay for tuition and qualified expenses of apprenticeship programs and can withdraw a lifetime maximum of $10,000 to pay down student loan debt.

Re: Deducting college expenses now or later - 529 plan

Hal_Al — Wed, 17 Mar 2021 01:50:17 GMT

Q. Will we be still be able to use the balance of the 529 funds to cover his student loans once he finishes?

A. No. A qualified distribution must be taken in the same year that there were qualified educational expenses. You cannot withdraw the money "later" and have it count for the tax free treatment. Furthermore the amount you withdraw must not be more that the expenses, in that year, to be fully tax free. Room & board are also qualified expenses if the student is half time or more. Board includes food even if the student lives at home.

There is $10,000 limit for college and trade schools. The $10K limit is for primary and secondary private schools and student loan payments