My oldest graduated from college with money still in their 529, but with some student loans to pay off. (I know, it doesn’t make sense, but we had extenuating circumstances and that’s our reality).
Do we just withdraw the money from the 529, put it in their account, and then pay off the loans? Or is there something more complicated that we need to do?
Edited to add that the 529 fuds are in the student’s name as both owner and beneficiary.
Thanks!
Make sure to read pub 970 section on QTPs if you haven’t already. Yes, it can be as simple as you describe but just keep records for a complete paper trail.
Thanks!
Yes, the process can be this simple. As politeperson notes, use IRS Pub 970 to learn the basics. Remember, repaying “qualified loans” count as “qualified expenses” for 529 purposes up to a limit of $10k.
Thanks!
One other point - Not all states treat it as “qualified expenses” for state taxes. For example, New York. That does not necessarily mean you owe anything on state taxes.