Have any of you drawn from your 529 account?

**cooliemae** · 06-07-2014, 06:08 AM

My 529 plan allows for the money to be disbursed to individuals or the institution so I would imagine that charging the tuition to get the points is perfectly fine. If asked you can always say that you feel more secure having the money paid via credit versus chancing the lost of check or exposure of 529 plan information to third parties (i.e. the school).

I would just keep a copy of the tuition bill, credit card statement, and distribution paperwork. That way you have a trail of the money if the IRS questions you.

**Like2Plan** · 06-08-2014, 04:36 AM

Originally posted by disneysteve View Post

Our daughter starts college in a couple of months. I had spoken with the financial aid folks at her school and was told that the 529 money needs to be paid directly to the school. I then went to the 529 plan website and it looked like I had a choice of how to take the money: a) direct to the school; b) direct to me; c) direct to my daughter. I called and they confirmed that, so the school financial aid department was wrong (which concerns me - seems like they should know how 529 plans work).

The reason I was asking is because I'd like to charge tuition on our rewards credit card and then use the 529 money to reimburse us. It would be nice to get an extra 30,000+ Marriott points at no cost to us.

Have any of you already drawn from your 529? Did you have the checks sent to the school or to you?

We had two types of 529 plans.
We had a prepaid tuition plan that paid directly to the school. The prepaid plan wouldn't disburse funds until the semester began. This always worried me a little bit because the school always had a due date about a month before the start of the semester. But, there never was an issue.
We also had another 529 investment plan (for room and board and books) which gave us the option of paying directly to the school (or vendor) or paying to us. We just had them cut a check to our son. If it was for something we paid for, he would reimburse us. AFAIK the funds drawn from the 529 should be made out to the beneficiary or it will mess up the 1098.
Our son's college started charging a 3% convenience fee for credit cards, so that stopped us from using that option--but, getting the airlines miles was really great while it lasted.

Be careful about bills you pay in December. You have to get the funds from your 529 account in the same year that you incurred the expense. For us, there was a lead time for disbursement and the holidays could add to the lead time.

**disneysteve** · 06-08-2014, 05:12 AM

I'm going to check with our accountant to make sure we do it right from a tax standpoint. It doesn't matter to me if the check goes to me or my daughter. If it has to go to her, she'll just deposit it and transfer it to me. As long as it counts as a qualified withdrawal, it's all good.

**cardtrick** · 06-08-2014, 06:18 PM

Be careful. Universities usually charge a credit card processing fee.

**moneybags** · 06-10-2014, 05:25 PM

I've withdrawn money from a 529. I have the check sent to me, not the school. I'm not sure how the school would even know if you did it this way. Sadly, DDs school charges fees to use credit cards, so no extra rewards for me.

Unless your income disqualifies you from education credits, make sure you don't pay 100% of expenses with the 529 so that you can maximize your credit.

Have any of you drawn from your 529 account?