Hello there, my dd23 graduated college in 2020 and has around 2k leftover in her Ohio 529. We can use this to pay her student loans if it doesn’t make taxes too complicated, does it? If it does, I can always transfer the money to her brothers 529 and give her 2k towards the loans. I want easy for taxes since I do ours myself.
I see that if we are going to use her funds to pay off loans a check has to be issued to either me, owner, or her, the beneficiary. If we go that route, which one of us should the check be made out to, again, want to simplify taxes. She has federal direct loans.
Thanks for any help
There is no tax reporting when 529 funds are used to pay (or reimburse) qualified expenses. You can’t get much less complicated than that (but make sure to keep good records of all transactions). See the paragraph numbered 6, page 60 in IRS Pub 970 for a bit more information on paying student loans with 529 money.
2020 Publication 970 (irs.gov)
The question of who the check should be made out to is probably moot, as long as the 529 money is used for a qualified expense.
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You do have to be careful with state taxes. For example, NY State 529 tax deductions are subject to recapture when 529s are used for student loan repayments. I did a quick search and I don’t think that is the case for Ohio.
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Thank you! I had read a thread on here about that in NY. I was hoping OH wasn’t like that.