<p>So for 15 years we've been socking money away in bank educational accounts and then 529s when they were invented so have a nice pile of money for college. But my dumb question is we have about 6 different accounts per child. One starts college in the Fall. The educational accounts reach maturity in 2017. </p>
<p>So my dumb question is how do you access that money. I'm assuming the educational accounts are like CDs so once they become due the money gets deposited elsewhere. You don't have a checkbook for the 529s so I'm asking where do you put that many and how does the govt know if you're using it for college. Sorry for being so dumb about this. </p>
<p>The bank educational accounts don’t sound like they are tax advantaged education accounts, just regular accounts that the bank markets for education. Are they Coverdells by any chance? But as far as I know, tax advantaged accounts don’t normally “mature”. You would have to provide more info about those. Have you been paying taxes on the interest earned by these “educational accounts” over the years? Some states do have special programs for savings for education that are tax advantaged. We bought some education bonds from our state program a few months before our first was born. They matured after 18 years and were tax free. So post further on what these accounts really are.</p>
<p>For 529 accounts, you contact your plan administrator and request distributions as you need them. The balance stays in the 529 until it’s depleted. Their website should give info on this or you could call. Distributions from 529s must be taken in the same tax year as the expenses are paid and can’t exceed qualified expenses in that tax year. Qualified expenses for 529 distributions are tuition, mandatory fees, room and board and required books and supplies.</p>
<p>You have to carefully watch when you pay 2nd semester expenses and when you take distributions for 2nd semester expenses. Both in the same tax year which is a calendar year for most everyone.</p>
<p>If you have the cash flow, the easiest way for me has been to pay the expenses up front so you know what they were and then get reimbursed from the 529. But we pay for 2nd semester in January so have plenty of time to take the distribution.</p>
<p>The primary source of information about tax advantaged education accounts is Chapters 7 & 8 of IRS Pub 970:</p>
<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
<p>Chapter 2 covers the AOTC. Note that you can’t use the same expenses to both claim the AOTC and to make the 529 earnings non-taxable. Only tuition, mandatory fees and required books and supplies are qualified expenses for the AOTC.</p>
<p>Edit: Added some info about state programs</p>
<p>ETA: And congratulations on socking away this money. It should give you more flexibility in school choices.</p>
<p>Ok, I have a lot to read but at least have an idea…thank you so much! I’ll double check those educational accounts. They have, for today very nice interest rates, so we left them alone the first time they matured…not sure how they were reported by the credit union we got them from, so I will dig out tax documents and see. You have been very helpful!</p>