![]() Remember those exceptions? Well, you can’t put your kid into the penthouse suite at the Four Seasons. Read more about how your 529 Plan can help your grade school kids. To get that number, add up all the eligible expenses and subtract any costs covered by tax-free assistance, such as scholarships, fellowships, Veteran’s benefits, Pell Grants, and the American Opportunity Tax Credit (AOTC).Īlso, in 2017, Congress expanded the 529 Plan program to include up to $10,000 for K-through-12 private school tuition, as well as apprenticeships at Labor Department approved programs. Qualified withdrawals cannot exceed your child’s QHEE’s. 529 Plan Withdrawal RulesĪccording to the IRS, withdrawals from 529 Plans are tax-free “when used for qualified education expenses of the designated beneficiary,” as described above. However, all of these come with exceptions. ![]() In addition to tuition, qualified expenses include room and board, books and supplies, computers and related equipment, as well as money used to repay student loans (capped at a $10,000 maximum lifetime limit per student). Tuition payments must be for a degree program or other recognized academic credit at the college level. Qualified education expenses are the amounts you pay for tuition, fees, and additional related expenses for eligible students, at eligible educational institutions. One of the first things you need to do is get familiar with the terms “Qualified Educational Expenses (QEE)” and “Qualified Higher Education Expenses (QHEE).” These are the IRS guidelines for spending your 529 Plan savings on legitimate expenses. That’s a lot easier if you’ve been stashing away money in a tax-free 529 College Savings Plan, but make sure you handle the 529 Plan withdrawals properly to avoid taxes, penalties, and headaches. Your son or daughter has been accepted to college, and now you get to pay (some of) the bill. Instructions PDF are available for both forms.Congratulations. Proposed regulations (84 FR 54529, October 10, 2019)ĪBLE programs use Form 1099-QA, Distributions from ABLE Accounts, and Form 5498-QA, ABLE Account Contribution Information, to report relevant account information annually to designated beneficiaries and the IRS. The Stephen Beck, Jr., Achieving a Better Life Experience Act (ABLE Act) More informationįor more information on ABLE accounts, see Publication 907, Tax Highlights for Persons With Disabilities PDF. The permissible rollover is limited in amount. ![]() More about rollovers from qualified tuition programsįunds from a designated beneficiary’s qualified tuition program (also known as a 529 plan) may be rolled into an ABLE account of the designated beneficiary or of his/her family member. A designated beneficiary can’t contribute this additional amount if his or her employer made a contribution for him or her to a:Ĥ01(a) defined contribution plan or 403(a) annuity contractĤ57(b) eligible deferred compensation plan In addition to the annual limit of $15,000 (the gift tax exclusion amount for 2018), a designated beneficiary who works may also contribute his or her compensation up to the poverty line amount for a one-person household. More about the increased contribution limit Increases the amount of contributions allowed to an ABLE account and adds special rules for the increased contribution limit.Īllows an ABLE account’s designated beneficiary to claim the saver's credit for contributions to the account.Īllows rollovers in limited amounts from a 529 qualified tuition program account of the designated beneficiary to the ABLE account of the designated beneficiary or his or her family member. ![]() Distributions are tax-free if used for qualified disability expenses. Funds from these 529A ABLE accounts can help designated beneficiaries pay for qualified disability expenses. The Achieving a Better Life Experience (ABLE) Act of 2014 allows states to create tax-advantaged savings programs for eligible people with disabilities (designated beneficiaries).
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