Using College Savings for AFA Expenses

Ashli McDonald

5-Year Member
Joined
Apr 19, 2010
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My parents have a savings account for my college expenses, but the only way to use those funds for Academy expenses, like plane tickets, etc. is to have the Academy purchase them so that it's an official college expense. Does anyone have any experience with this?
 
finances

That is a very good question. I think that would be worth calling your admissions counselor and see if he or she has the info. or knows who can better assist you.
 
My parents have a savings account for my college expenses, but the only way to use those funds for Academy expenses, like plane tickets, etc. is to have the Academy purchase them so that it's an official college expense. Does anyone have any experience with this?

There are limitations as to what a 529 college savings plan can be used for... but one thing I was told by our 529 plan representative is that if the student that the parent is saving for gets a full college scholarship then that money can be cashed out without the penalty. It can also be used for a different person's college expenses-like a sibling or cousin. Just something they might want to ask about.
 
I think its more of a CPA question...however from
http://www.irs.gov/publications/p970/ch08.html
Qualified tuition programs (QTPs) are also called “529 plans.”

Exceptions. The 10% additional tax does not apply to distributions:
Made on account of the attendance of the designated beneficiary at a U.S. military academy (such as the USNA at Annapolis). This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U.S. Code) attributable to such attendance.

But as they say, check with your qualified tax advisor...
 
Thanks for your input! I'm hoping to get a call back from my counselor today. I'll post the outcome.
 
I checked on this in the past. Travel is not an eligble expense. If you google 529 plans you can find eligible expenses. Basically, it can't be used for much of any Academy expensives. Once I am sure my DD is staying at the USAFA I am transfering her 529 to her brother.
 
Even though they are essentially paying for those expenses through a deduction from their pay? I wondered if that made any difference.
 
Just computer, books and supplies that are required by the AFA and are paid for by the cadet. Again, unfortunately transportation is not eligible.
 
Our daughter wasn't able to use hers during her academy days, but she is using it to help with the graduate school on base she's doing while working. (the AF has some tuition assistance which she uses, but she's appreciated having the fund for the books and other required fees. Anything required for the class can be used from the 529 plan.) She even did some elective type distance education courses that didn't get tuition assistance from the AF. For our state they let you keep it until you're 28, at that point it has to be transferred to someone else or cashed out. I think having it really encouraged her to get going on grad school, knowing that she wouldn't be able to keep it indefinitely.

She's transferring bases so will have to transfer grad school programs unfortunately, but she found out that 25% of the credits can be transferred in to the next program, so she only attained that many credits. She's hoping to stay at the next base long enough to complete the 75% of credits. The classes are right on base, after the work day finishes. The teachers have been very good, and I think her bosses have been really supportive of her doing this.
 
Sorry to revive an ancient thread, but I searched and could not find more recent posts relevant to the topic. Is there more up to date info than the one quoted here for Cost of attendance 6 years ago, specifically this table, found in one of the links to 2010 Jan newsletter?
Expense Freshman Sophomore Junior Senior
Uniforms 4,020 360 590 790
Computer 2,312 72 72 66
Personal Service Fees 1,474 405 405 390
Arts and Athletic Fees 170 170 170 170
Media and Textbooks 2093 1,269 1,269 1,355
Total $10,069 $2,276 $2,506 $2,771

I looked through the last year of newsletters and could not find anything of that sort.

Thanks.
 
The money in one child's 529 can be transferred to a siblings 529.
 
Do some "Googling" on the subject. Each of the Service Academies has published a number indicating the value of a year's education...in the neighborhood of $45K/year. You can withdrawal that from the 529 and pay no penalty in a single year. You will still have to pay tax on the cap gains.

Without penalty or Cap gains tax, you can use funds to pay for computer, printer and other computer related peripherals like software, external drive; books and required fees. Maybe more. There's good info in the public domain.

I draw the line at uniforms. For me, that expense doesn't comply with the spirit of the law.

At the end of the day, you need to feel comfortable justifying expenses to the IRS. Save those receipts!
 
Both our financial planner and our accountant told us to simply take a disbursement from the 529 each semester in the amount we would have paid had the academy actually been sending us a bill. So, we divided the amount of the "scholarship" by 8 (semesters) and are withdrawing that amount from the 529 twice a year. The money just goes into a private account and we use it as needed for son's travel and other expenses. The excess is ours to keep minus the tax on the gain as @DTrain1986 noted above. Our accountant said that this withdrawal schedule is both reasonable and justifiable as the law is not specific about disbursements.

According to the Military Family Tax Relief Act (irs.gov):

Military academy attendees
The ten percent tax on payments from a Qualified Tuition Program or Coverdell Education Savings Account that are not used for educational expenses does not apply to attendees of the U.S. Military, Naval, Air Force, Coast Guard or Merchant Marine Academies, to the extent the payments do not exceed the costs of advanced education. Effective for tax years after 2002.
 
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