Can you reimburse yourself from a 529

You can withdraw plan savings tax-free to pay for qualified education expenses , which include costs required for the enrollment and attendance at in-state, out-of-state, public and private colleges, universities or other eligible post-secondary educational institution.

Here are four steps to help you navigate the plan withdrawal process and avoid paying taxes and penalties on your savings. You should take plan distributions during the same year in which you paid for the qualified expenses. For example, do not include second semester tuition expenses that you paid for in December of the previous year. If the beneficiary has more than one plan, consider withdrawing from a parent-owned plan account first.

However, a new FAFSA form, which is scheduled to go live on October 1, , eliminates the grandparent financial aid trap. Accordingly, the IRS and the Treasury Department propose to adopt a rule that, in order for earnings to be excluded from income, any distribution from a section account during a calendar year must be used to pay QHEEs during the same calendar year or by March 31 of the following year.

The IRS and the Treasury Department welcome comments on rules necessary to ensure that distributions from section accounts are appropriately matched to the payment of QHEEs.

However, the idea to add clarification to this situation never gained enough traction to become a reality. IRS Publication , which explains many matters of tax law, makes no mention of reimbursement withdrawal deadlines.

Neither does U. Likewise, if you take a distribution in January to pay for expenses from the previous December, that distribution will be a non-qualified distribution. Virginia states their recommendation more accurately. Thus, you're getting more than just security from these safe dividend stocks.

October 22, Financial Planning. October 29, Achieving your goals takes patience and time — but starting early will give you a big edge. And while it may feel unnatural, put yourself and your re…. Watching your college savings grow tax-free with a college savings plan feels great, but failing to follow the rules could come with penalties and…. October 23, The plan can send withdrawals by check to the account owner, the beneficiary, or the school.

You can transfer the money to yourself or the beneficiary electronically and then make payment to the school. This process generally takes 3—5 business days.

For NYs Direct Plan , the plan administrator can send a check to the school. This is a convenient option for families. You should allow 7—10 business days for the check transfer.

In order to get the benefit of federal tax-free earnings, you must use your plan money for education-related expenses.

The good news is that the IRS has a broad definition of qualified education expenses, which include:. Examples of nonqualified education expenses include:. For a full list of qualified education expenses, review IRS Publication You might want to spread out withdrawals over the 4 years of college. Also, deduct any federal tax credits, like the American Opportunity Tax Credit.