<p>My mom has a 529 collegefund account that she created for my daughter which has a few thousand dollars in it. She contacted them recently to find out how to get the money out and they stated that she just needed to call and request the money. She can either instruct them to send the check in her name, which at the end of the year she would get a 1099 form and she would have to report the funds (although she would not be taxed on them), or she can have them send a check in my daughter's name or the college name, in which my daughter would get the 1099.</p>
<p>If my daughter uses the funds for room/board/books (not tuition) would she have to pay taxes? If the money goes to my mom who pays the expenses, would my daughter still have to claim the funds as income?</p>
<p>Please let me know if there is anything I should be aware of in regards to disbursements from these types of accounts.</p>
<p>Thank you</p>
<p>There are a couple ways to look at this. The main issue, though, is whether your daughter is eligible for any need based aid. If she is, then how you handle the 529 disbursements can matter. If she’s not, then as long as the money is spent on qualified expenses, there is no tax to anyone and it doesn’t really matter who gets the 1099.</p>
<p>Distributions from 529 accounts that are used to pay for qualified higher education expenses are not considered income and are not reported on anyone’s taxes. If your mother is the custodian of the account, she will get a 1099-Q form that she can keep for her records, but nothing needs to be filed. She can withdraw the funds and send them to your daughter whenever your daughter’s college expenses (room & board) need to be paid. It’s a bit cleaner if the withdrawals match the expenses, but not absolutely required as long as the totals match up at the end of the year.</p>
<p>'rentof2, yes my daughter qualifies for need-based aid. Her EFC is 4722 and she has already received a few offers which seem to cover tuition, but not room and board which is why I asked specifically about disbursements to pay those expenses.</p>
<p>Thank you vballmom for the info.</p>
<p>Paying for room and board with the 529 plan is a great idea, particularly since room & board doesn’t count toward the federal tax credits.</p>