How to handle tuition reimbursement

Paying for College
1

<p>A friend asked me this and I'm stumped:</p>

<p>Son starts a private school in Fall 2008. First semester tuition, room and board and books, plus second semester tuition come to about $32,000. Son gets $5,000 scholarship so parents withdraw $27,000 from 529 plan and send whole thing to college. Son doesn't do well after first semester so he stays home and enrolls in community college. Tuition there $1,500. First school reimburses parents $11,000 in January of 2009 for the second semester of tuition that was not used.</p>

<p>Taxable event? Or can parents use that reimbursement for qualified education expenses during 2009 and not have to pay tax or penalty. Can they send it back to 529 plan? Any advice?</p>

2

<p>I don’t think it is a taxable event if you ROLL it back to the 529. Just keep your records, and continue to use it for his tuition at the new school. You have used it as it was intended, qualified tuition and expenses.</p>

<p>swimcatsmom may have better advice, but that is what I would do.</p>

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<p>[Publication</a> 970 (2008), Tax Benefits for Education](<a href=“http://www.irs.gov/publications/p970/]Publication”>Publication 970 (2023), Tax Benefits for Education | Internal Revenue Service)</p>

<p>check out the distributions sections. I don’t know if it mentions being able to put the unused money back in a different year</p>

<p><<any amount=“” distributed=“” from=“” a=“” qtp=“” is=“” not=“” taxable=“” if=“” it=“” rolled=“” over=“” to=“” another=“” for=“” the=“” benefit=“” of=“” same=“” beneficiary=“” or=“” member=“” beneficiary’s=“” family=“” (including=“” spouse).=“” an=“” paid=“” within=“” 60=“” days=“” after=“” date=“” distribution=“”>></any></p>

4

<p>How long do you have to roll it back? If the money was reimbursed in January and we’re now in March, can you still put it back in the 529?</p>