Reimbursement from 529 plan

Forum|Forum|2 years ago
March 21, 2024
2 replies
0 views

I paid $400 deposit by credit card for my son's college tuition on August 2023, but I forgot to get the reimbursement from the 529 plan. Can I get the reimbursements from the 529 plan now before the tax due or is it too late that I need to get reimbursed during the calendar year 2023? Do I get any penalty if I get the reimbursement now? Thanks.

DawnC

Employee

There is no tax due or penalty for not taking a 529 plan disbursement. As long as the money you take out of the 529 plan is used on qualified educational expenses (QEE), there is no tax or penalty. You just can't take an education credit for anything you pay with 529 funds.

You have to check with the 529 plan administrator to find out the exact rules are for reimbursements - but there is no tax penalty incurred for taking a distribution, before or after you pay for QEE. The tax comes in play only if you use distributed funds for things other than QEE.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

YM23Author

Thank you very much for your response.

Hal_Al

Employee

Q. I paid $400 deposit by credit card for my son's college tuition on August 2023.Can I get the reimbursements from the 529 plan now before the tax filing deadline?

A. No. To be a qualified distribution, the money must be taken out in the same calendar year that you had qualified expenses.

Q. Do I get any penalty if I get the reimbursement now?

A. Simple answer: yes. But if you have other qualified expenses, later in 2024, you can count those expenses against this $400 distribution.

joelevy

Really? Where is this stated in the IRS rules that it has to be the same year? I think you can withdraw anytime.

Hal_Al

Employee

Q. Where is this stated in the IRS rules that it has to be the same year?

A. IRS Publication 970, which says, in part:

"To determine if total distributions for the year are more or
less than the amount of qualified education expenses, you
must compare the total of all QTP distributions for the tax
year to the AQEE"

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

Also, see previous discussions on this topic:

https://ttlc.intuit.com/community/college-education/discussion/529-provider-distributed-funds-on-12-30-for-spring-semester-resulting-in-a-mismatch-between-1099q/01/2200938/highlight/false#M41204

https://ttlc.intuit.com/community/college-education/discussion/i-took-a-529-distribution-in-2021-for-a-bill-due-jan-1-2022-is-there-a-way-to-reconcile-the-tax/01/2664891/highlight/false#M46863

https://www.savingforcollege.com/article/timing-of-529-plan-distributions-must-match-qualified-expenses