Thanks @BelknapPoint - That’s a good idea to reach out to the school FA office. I inquired with VA529 and they sent me a link to an IRS publication - not very helpful!
He has an instrument that we purchased at the end of middle school but he can’t really continue using it at the college level.
I’m also in my first year of using 529 funds, and there are so many things I’ve learned on these boards and reading up extensively. Some of the most important things I’ve learned and have done:
• Taking withdrawals and paying the school’s bills in the same calendar year. For example, Fall bill was due mid-August. I withdrew funds in late July (that’s an easy one). Spring bill was due January 7. I withdrew funds January 2, NOT in December. It has to be in the same calendar year.
• There are three places where you can direct the funds from your 529: To yourself (generally the account owner); to your child (the beneficiary); or to the school directly. I opt to have the funds sent directly to the school. In the case of expensive equipment needed as a requirement of the program my son is in, I had the funds disbursed to him directly. My understanding is that this can help make tax time a bit easier, because the 1099-Q form then does not have the box checked that says that funds went to someone other than the beneficiary. I really don’t know if it matters as long as you keep careful records, but a lot of articles seem to indicate that sending funds directly to the school or beneficiary is a better way to go. I think this may have to do with who would owe taxes on any excess withdrawals – child or parent (since tax rates vary). By the way – many schools only accept 529 funds via paper check, believe it or not. Factor that in accordingly or be prepared to pay for Fed Ex if you’re really close to the school’s deadline.
• Knowing what’s qualified and not qualified. Specifically being careful about which “fees” are qualified. Same for supplies.
• Understanding that if your student lives off campus, you can still use 529 funds toward rent and food, but you must keep really careful records and receipts. And you can ONLY use 529 funds for off campus housing up to the published cost of attendance for housing. This is really important. For example, many schools have different dorms or housing which cost different amounts. They can vary by thousands, sometimes. The school’s cost of attendance might be closer to the low end of that housing or somewhere in the middle. Make sure you know what that is. Check with the FA office to be sure. If their cost of attendance for housing for a semester is $2500, that’s all you can use your 529 funds for in terms of off campus housing. Your child must also be at least a half-time student, so check on what that means, too.
• This was my first year using 529 funds, so I decided to set up a spreadsheet so that I could carefully track everything. On the spreadsheet, I show every qualified expense throughout the semester: books, fees, supplies, direct bills from the school. I keep all receipts for each. In another column, I show how I paid for each of these-- either through 529 funds or income. At the end of the year, I add it up. If the total qualified expenses were equal to or MORE than the 529 withdrawals, there is nothing to report on your return and you owe no tax. If the withdrawals were more than the expenses, I believe you need to report the excess. And if any of that excess was for non-qualified expenses, you pay a 10% penalty on top of that. Keep great records.
Hope this helps someone. I found the whole thing to be way more confusing than I anticipated.
@WantWhatsBest - I think your post is helpful. I just wanted to clarify one thing -when you said
" Spring bill was due January 7. I withdrew funds January 2, NOT in December. It has to be in the same calendar year."
You are correct that it has to be in the same calendar year. But I wanted to point out that many schools will accept the payment of the Winter/Spring term in December, it sometimes make sense to withdraw the 529 funds in December, and pay the school in December. This may vary by school.
Tthe student graduates in May following senior year, flies the nest, and gets a job immediately, becoming a self-sufficient member of society (like we all hope 
will happen). The student is no longer a dependent if their parents are not providing more than 50% of support.
Since there are only 4 years of AOTC, parents usually want to take advantage of them fully, and paying only 1 semester (their freshman fall) tuition/fees in their very first semester doesn’t always qualify them for a max AOTC. Paying both terms in the same calendar year may help.
There are lots of different situations and schools have different rules, but for some people, this is something to think about.
^^^
On the flip side, if there are payments for qualified expenses in the five tax years that cover four academic years, it’s possible to take advantage of education tax credits for all of those five tax years through a combination of the AOTC and the Lifetime Learning Credit. As always, proper prior planning and execution can lead to the best outcome.
Great points of clarification!
For one child, I used the AOTC for the first 4 year. For the other one, I didn’t use it the 4th year because that was her study abroad and the they did not count very much as tuition but all as small ‘fees’ and did not issue a 1098-T. It was just easier to save that year’s AOTC and use it for the 5th year.
When paying a college bill, can the schools generally accept part of the payment directly from the 529 and the other part from us? Is that confusing to the bursar to be getting payments from different places for one bill?
This is doable and shouldn’t be anything new for a bursar with even limited experience in the job. You can always touch base with the bursar’s office before initiating payments to make sure both parties are on the same page. If sending 529 funds directly to the school, it’s also a good idea to make sure the school understands that this is money from a 529, and not an outside scholarship (such confusion might in some cases lead to a decrease in need-based aid).
@BelknapPoint thx. No need based aid here. We are paying full tuition. Just trying to decide if we should withdraw what we’d like from the 529 each time and have that sent to us and then pay tuition bill ourselves or send part from 529 and and part from our savings. Didn’t know if it was weird for the school to receive partial payments from two sources that add up to the total bill. In fact, now that I think about it, the college will get three partial payments for one bill - one from our prepaid Illinois tuition plan, one from 529 and one from us. Hm. Maybe I should just have those prepaid and 529 withdrawals sent to us and we should just pay with one check. I’'ll call the school!
My daughter had payments from 9 different awards, plus any overage I paid. Four were from the university itself, although from different departments. Two were from state sources, although different agencies and paid at different times (Bright Futures pays long after the semester starts, like 4 weeks later). Federal loan money is from a different source than Pell grants.
I don’t think the school cares as long as the amount received = amount due.
The school DS is considering says on it’s payment portal that having the 529 money sent to you and then paying the school is the preferred option. They claim there are sometimes screw ups with the 529 money getting sent to the right address from the 529 plan and there are often long delays from when funds are requested to when they finally post to your account. Plus, the school cannot accept payment for an amount over the total due, so even if the 529 payment is $1 over the entire thing is rejected. I’m planning on requesting the funds be sent to me with plenty of time to spare and paying the university myself.
That seems strange to me, @cshell2. My kids had overpayments all the time and the school just refunded the money. I can understand the 529 money getting stuck in an account not matched to the student but not rejecting it because it is an overpayment.
I don’t know. I have no actual experience making payments, so maybe they’re just saying they won’t accept it, when what they really mean is they don’t want to have to issue a refund. This is how it’s written:
I would check with your 529 plan and your college bursar’s office. Our 529 plan indicated that you had to allow 2-3 weeks for payments to be made to the school. It never took that long. Was a week to 10 days at most. That presumably varies by plan.
Some colleges have specific addresses for 529 payments. Isn’t the same for as for non-529 plan payments. I suspect that isn’t true for every school.
In terms of timing, I have found that payments made to me to reimburse me for QEE items I paid directly were faster to process because they were electronically deposited into my account rather than having a check cut to the college (less than 5 business days).
I would expect a school can handle payments from more than one source. Will reduce the balance until its paid in full. But I would ask the school.
We still have 18 months or so before needing to withdraw from D22’s 529 account but I thought I’d start learning about how to go about it. This thread is helpful to anyone who is new to this.
I would be grateful for advice on the following:
In terms of investment risk, how have people de-risked their 529 account 18-24 months prior to the first disbursement?
What are good practices/pitfalls to avoid when paying college expenses from a 529 account to a non-US university in a different currency?
Thanks!