I do not have definitive information. Sorry if I sounded that way.
It just made sense to me, and I will be following such rule myself.
That you can withdraw penalty free years after the kid left college does not make sense to me. But who knows.
Depends on the state.
Read more here: http://www.newsobserver.com/2013/12/14/3457870_nc-tax-deduction-for-529-plan.html?rh=1#storylink=cpy
This ended before 2014.
Just to be clear… I’m not interested in speculation. rgosula made a definitive statement about a topic that as far as I know had not been directly addressed by the IRS. I was wondering if perhaps rgosula had seen something from the IRS that I had not. Thanks to rgosula for clearing things up for me. But with all due respect to rgosula, when it comes to advice on all matters 529, between Joe Hurley and an unknown quantity opining on an internet forum, I’ll probably give more weight to what Joe says.
From a Savingforcollege,com article (actually a reply by Savingfoecollege.com to an question asked in the comments section):
We see nothing in the law or IRS rules that would prevent you from claiming the
scholarship exception to the 10% penalty in 2014 when the scholarship was
received in 2013, or any other year. Confirm this with your tax professional."
I read this as “this is a grey area”.
^^^
savingforcollege.com is Joe Hurley’s website, so I’m not surprised he has given that advice, based on what he had to say in the bankrate.com piece that I linked to in my post #56.
Good point. We do have some previous year scholarships that were not consumed by distributions. There will be current year scholarships, but for reasons below, I probably won’t use those.
Thanks for that idea. So that exact idea won’t work, but it got me thinking.
It won’t work now because although I’m no getting income through work, I am doing traditional IRA to Roth IRA conversions to top-out the 15% tax bracket. This is top priority. I think I’d rather give the remainder to my grandkids than pay 25% on the gains. On a related note, I was thinking that the beneficiary could pull money equal to the scholarship out, and she would pay tax on it (in her tax bracket). That would negatively affect financial aid, though. But it would work for senior year. And if earlier years of scholarships are available, then she could dribble it out, filling up her (lower) tax bracket, year after year.
I just got wind of this site “stratagee.com”, if you want to pay money to prevent bumbling through it, like I did.
Also, there’s warning for grandparents and 529’s at this url: http://www.marottaonmoney.com/grandparents-is-your-helping-hurting-financial-aid/