529 Withdrawal Timing question

[alsn]

My dependent child will be attending the graduate program starting in January 2024. He has paid for the following during September through December 2023.

- Deposit towards fees for the first semester (2024) (paid in September)

- Laptop (required for school) (paid in November)

- Books (required for school) (paid in December)

Should these expenses be considered qualified expenses for 2023 or 2024? I understand that withdrawal must be made in the same calendar year as the calendar year of expenses. I would appreciate prompt response as he has only a few days to make the withdrawal if it must be made in 2023. Thanks.

[Bsch4477]

Expenses for 2024 paid in 2023 are reported on the 2023 return 

[Hal_Al · Accepted solution]

Q. Should these expenses be considered qualified expenses for 2023 or 2024?

A. 2023.

As you correctly understand, the 529 withdrawal (distribution) must be made in the same calendar year as the calendar year the "qualified" expenses were paid for. Expenses paid, in 2023,  for an academic term beginning in the first quarter of 2024, are "qualified educational expenses' (QEE) for a 2023 distribution. 

It is not optional. If you paid 2024 expenses, in 2023, you must take the distribution in 2023 and not wait until 2024. 

[alsn]

@Hal_Al Thank you for your prompt response. Appreciate it very much.

[alsn]

@Bsch4477 Thank you.

[alsn]

@Hal_Al Please note that the course does not start until January 2024 i.e. he is not enrolled in the course during 2023. Does that have any impact on this answer? Thanks.

[Bsch4477]

Read page 14. Pub is 2022 but 2023 would apply for term in 2024. 

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

[alsn]

@Bsch4477 Thanks. However, this refers to qualified expenses for AOTC. The question is about 529 withdrawal. Thanks.

[Bsch4477]

The same applies to 529. 

[Hal_Al]

Q. Please note that the course does not start until January 2024 i.e. he is not enrolled in the course during 2023. Does that have any impact on this answer? 

A. No.  The answer is still the same. Expenses paid, in 2023,  for an academic term beginning in the first quarter of 2024, are "qualified educational expenses' (QEE) for a 2023 529 plan distribution. The the first term of the next year rule applies to 529 plan distributions,  as well as for a tuition credit (AOTC or LLC).