NY 529 Account collage fund

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Hopefull Dad

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Jan 22, 2013
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Can anyone explain the process of getting 529 Account education funds to cover the expenses (uniforms, computer, etc.) at USAFA ?

2017 cadet Dad
 
You can not use 529 Funds for USAFA. It is not a qualified institution. You can transfer to another sibling, withdraw funds(without penalty) or save for grad school.
 
Hopefull Dad said:
Can anyone explain the process of getting 529 Account education funds to cover the expenses (uniforms, computer, etc.) at USAFA ?

2017 cadet Dad
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You can withdraw the funds without the 10% penalty because the intended recipient is attending one of the service academies. The distribution would still be taxable as regular income, and the amount that you can withdraw without penalty is limited to the "cost of education" at the Academy which I believe is calculated at about $36,000 per year.

IRS Link to Publication 970

It really doesn't do any good to pay for the uniforms and computer rather than take the loan because the loan is interest-free and the cadet will still not get a larger paycheck until the loan period is over. The excess will be in held pay until that time.

Stealth_81
 
My personal experience only, we pulled funds out of the 529 plan and yes you are allowed to take them out penalty free if student is attending a Service Academy. Proceeds are taxable but it is only the gain you actually paying tax on. In our case, most of it was return of principal so our actual tax hit was pretty low since 80% was cost basis and 20% was gain. Apply your tax rate of 15% to 33% on the gain and it may not be as big a hit as you first assumed. Well worth running the numbers if you really have to liquidate the 529 to cover the SA deposit, airplane tickets, or other related expenditures.

There have been many posts on this forum as well as documents on each of the SA sites. Don't know where to look for USAFA, but on the USMA site you can review their documents at the Parent section under Tax Information
http://www.usma.edu/Parents/SitePages/Home.aspx
These documents will explain that SA's are not eligible for the Hope Credit and other college tax benefits.
 
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