Withdrawl from 529 sent to the beneficiary... now what?

[mrpaseo]

The college and on line research has told me to have the withdrawal sent directly to the beneficiary. How do I claim it on my taxes?

[doingitallwrong]

If the distribution was sent directly to the beneficiary, then the beneficiary should get a Form 1099-Q and will report the distribution on their own taxes. It wouldn't go on your return. So long as the distribution isn't more than the qualified higher education expenses, less tax-free assistance and any tax credits, the earnings won't be taxable for anyone.

[disneysteve]

I wonder why they told you to have it sent to the beneficiary. My daughter's college tried to tell me it had to be sent directly to the school. Turned out that wasn't true. I'm having the withdrawals sent directly to me, then I charge tuition on my rewards credit card to get the points, then pay the credit card bill with the 529 money. Works out great.

[mrpaseo]

Hmmm... My daughter has had zero income for the year. I put all College expenses (I withdrew only for the class and books) on my cc and paid the balance off as I usually do (Monthly).

How will she show that the deductions were used for College? I guess the good news is she has a cc on my account (Only to be used on my approval). I guess she will use that info when she files.

[doingitallwrong]

The form/worksheet where you report the 1099-Q income also has a line to indicate how much of that income was used for qualified higher education expenses. She'll also get a 1098-T from the school with her tuition and amount paid. If the 529 distribution covered the tuition and fees, then she can report the 1098-T as well. (This will show the IRS how much she was charged for tuition along with how much she paid from the 529 plan.) Keep the credit card statements in case of an audit, but if the numbers are in line you should be OK.

If the 529 funds were less than tuition and fees, and you're looking to take a credit on your own return for paying the balance, then you'll need to report the 1098-T and the amount you paid, less the 529 money. It doesn't sound as if that's the case here, though.

[Bright]

I wonder why they told you to have it sent to the beneficiary. My daughter's college tried to tell me it had to be sent directly to the school. Turned out that wasn't true. I'm having the withdrawals sent directly to me, then I charge tuition on my rewards credit card to get the points, then pay the credit card bill with the 529 money. Works out great.

I never thought of this!!! Awesome idea!

[mrpaseo]

The form/worksheet where you report the 1099-Q income also has a line to indicate how much of that income was used for qualified higher education expenses. She'll also get a 1098-T from the school with her tuition and amount paid. If the 529 distribution covered the tuition and fees, then she can report the 1098-T as well. (This will show the IRS how much she was charged for tuition along with how much she paid from the 529 plan.) Keep the credit card statements in case of an audit, but if the numbers are in line you should be OK.

If the 529 funds were less than tuition and fees, and you're looking to take a credit on your own return for paying the balance, then you'll need to report the 1098-T and the amount you paid, less the 529 money. It doesn't sound as if that's the case here, though.

Excellent, this seems easy enough though next year I may do it DisneySteves way (Which is what my original plan was until the college told me to do it the way I did).

Thanks,
Ray