Q: My son will be starting academy in Maine this fall, and we’ll abjure money from his 529 plan for the aboriginal time. Do we charge to accommodate the college-saving plan with affirmation of acceptable costs afore we can admission the money? Also, is there annihilation appropriate we charge to do at tax time?
A: You don’t charge to accommodate the 529 plan with affirmation that you will be application the money for acceptable expenses, but you do charge to accumulate the receipts, canceled checks and added paperwork with your tax annal in case the IRS after asks for affirmation that the money was acclimated for able expenses.
You can abjure money tax-free for tuition, appropriate books and fees, and alike a computer and accompanying software. You can additionally booty tax-free withdrawals for allowance and lath (whether in an on-campus abode or off-campus housing), as continued as your son is a apprentice at atomic half-time.
You can pay the bills and again balance yourself from the 529. The plan may accelerate you a ysis or drop the money anon into your coffer account. Vanguard, for one, will accelerate funds to annual owners by cyberbanking coffer alteration if they accommodate their coffer annual information. Or the plan may accelerate a ysis anon to the school.
“We can accelerate a ysis to the annual owner, the apprentice or the school. We are not able to accelerate funds to a third party, such as an accommodation circuitous or landlord,” says Char Gross, arch and arch of Vanguard’s Apprenticeship Savings Group. But don’t delay too continued to abjure the money, she says. “Account owners charge balance themselves in the aforementioned agenda year the costs were incurred.”
Ask your plan whether your accompaniment requires any appropriate documentation. “Some states may accept different advertisement requirements if they action accompaniment tax deductions, credits, ogous grants or added programs,” says Brian Boswell, of Savingforcollege.com.
The 529 plan ambassador will accelerate you Anatomy 1099-Q by the end of January to certificate any withdrawals taken in the antecedent agenda year.
If the withdrawals are fabricated by the annual owner, the 1099-Q will be in the annual owner’s name. If the withdrawals are beatific to the almsman or the school, the 1099-Q will be in the beneficiary’s name, says Gross. If withdrawals listed on the 1099-Q were acclimated for able apprenticeship expenses, artlessly book the anatomy with your tax records.
Kimberly Lankford is a accidental editor to Kiplinger’s Personal Finance magazine. Accelerate your questions and comments to [email protected] And for added on this and agnate money topics, appointment Kiplinger.com.
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