529 WIthdrawal in Year Prior to College Semester

[CrazyKSmith]

My freshman son's spring 2023 college tuition is due 12/1/22. I plan to pay it with our 529 plan. In the past, I've paid myself rather than the school directly. Are there problems that will arise from withdrawing 529 funds in 2022 for classes in spring 2023? Would I be better off paying the tuition from my bank account by 12/1/22 and getting reimbursed from my 529  1/1/23 or later? I don't know if it makes a difference, but I also have another child in her senior year of college whose spring 2023 tuition isn't due until 2023. 

[pmurphy3]

The requirement on the withdrawals from 529 plans is that it is used for college tuition.   The brokerage will issue a Form 1099Q and you need to be able to show that it was used for the tuition.   In the filing for 2023, you will be asked if you paid tuition in the year prior.   This will match to the issued Form 1099Q.

This is also a good plan:

"Would I be better off paying the tuition from my bank account by 12/1/22 and getting reimbursed from my 529  1/1/23 or later?"

It actually keeps the whole transaction clean and simple.

By the way, if you do it in 2022, have the check sent directly to the college or university.

[Hal_Al]

Technically, what must happen is that the payment to the school must be in the same calendar year as the distribuiton from the 529.

Q. Are there problems that will arise from withdrawing 529 funds in 2022 for classes in spring 2023?

A. No. As long as the payment for Spring 2022 was also made in 2022. It is OK for you to pay the school on 12/1/22 and then have the 529 send you money later that month.

Q. Would I be better off paying the tuition from my bank account by 12/1/22 and getting reimbursed from my 529  1/1/23 or later? 

A. No. Technically, that would make the 529 distribution non-qualified. We have no information about how strict the IRS is about that rule.

Q. I don't know if it makes a difference, but I also have another child in her senior year of college whose spring 2023 tuition isn't due until 2023.

A. Again you want to match the 529 distribution year to the payment year.  If you pay in 2023, take the distribution in 2023.