How to Withdraw from a 529 Plan?

[HaltCatchFire]

I am doing this now, with kid 1.0.

How to withdraw:

This is what I’m doing for kid 1.0’s 529. She’s in college presently.

1. I log in to the 529 provider (T. Rowe Price in our case).
2. I ask for a distribution from 1.0’s account.
3. They do an ACH transfer of funds to my checking account.
   1. We set this up previously, when we made the first distribution.
   2. They can write a physical check, which takes longer, or they can do a wire transfer, which is faster but has added costs.
   3. They can send it to the school, too, but that’s not what we did.
4. A few days later the money materializes in my checking account.

The procedure for your provider will likely rhyme wit this. Decide if you want the money sent to you, or direct to the school, and go from there.

What’s a qualified expense?

The IRS defines qualified expenses here. Summary is that tuition, books, required fees, etc. are qualified. Room and board are not.

EDIT: the above information is wrong. Updated information from the Tax Strategies board here:

College Room and board and 529 plans

Yes. This is the citation that is relevant to 529 plans, since the title of the document you cited is Guidance on Recontributions, Rollovers and Qualified Higher Education Expenses under Section 529 This citation is specific to tax credits (American Opportunity Credit and Lifetime Learning Credit). In fact, in this citation, below where you took your quote from, it specifically says that if you’ve used 529 (i.e. tax-free) funds to pay for the expenses, they aren’t eligible for the credits…

Just in case someone else comes through here later and reads this thread.

How to document the expense:

You should receive a 1098-T form from every institution where you paid tuition. This would document that qualified expenses occurred. This is used in preparing your income tax return.

Regards,

– HCF