Here are three tax tips to consider when making 529 Plan withdrawals for college expenses:
1. Reimburse yourself now from your 529 Plan for qualified college expenses you paid in 2013 before the end of the year, allowing several days for processing. (Remember that the tax year is not the same as the school year.)
2. If you qualify for the American Opportunity Tax Credit, reserve $4000 of qualified expenses from your reimbursement calculation, because you cannot count the same expenses for more than one education benefit. (You do not need to do this if income phase-outs prevent you from claiming the AOTC.)
3. Request that the 529 withdrawals be made in the name of the student beneficiary so that this information is recorded on the 1099-Q for the IRS. (This is not required - you can choose the student, the college, or yourself as the beneficiary - but it may save you from documenting the withdrawal later on if the IRS questions it.)
Contact your tax advisor for more tax information specific to your situation. For personal college advisement, an Independent Educational Consultant can help. Please visit www.BetterCollegeChoices.com.