Using 529 for USMMA Expenses

[futureusmcmom24]

Does anyone know if the plebe kit and the invoice for the laundry service are "Qualified" or "Unqualified" for 529 plan disbursement? Since these expenses are required in order to attend, I think they should be qualified, but not 100% sure!

Publication 970 states

1. The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school.
   1. Tuition and fees.
   2. Books, supplies, and equipment.

 

[Bearlymilitary]

Even easier answer...you can pull any 529 monies up to the value of the scholarship, penalty/tax free.

 

[futureusmcmom24]

Thank you for the reply! I was aware of that (which is fantastic!) but my plan advisor still needs to know if the expenses are "qualified" before making the distribution.

 

[JohnPAKP65]

Check the thread at https://www.serviceacademyforums.com/index.php?threads/midshipman-expenses.81093/. Specifically scroll down to content from late April 2021 for content relate to the 529. You might also want to track down an answer from the financial aid office at the Academy. In that regard see Financial Aid. In the left panel, you’ll see “Contact Us” and you should use that for official info.

 

[JohnPAKP65]

I can’t edit my previous due to a time limit but at the Financial Aid site FAQ section, at the very bottom is the following:

“I have a 529 college savings plan (or other college savings plan) for my child, may I use these funds to cover the Cost of Attendance at USMMA?

Absolutely! USMMA is a fully accredited four year degree awarding university and accepts funds from any/all college savings plans. If your 529 Plan requires documentation to release your savings, please contact the Finance Office (OAFM) for further details.”

 

[Sealion II]

And if you have funds left over in the 529, look into the rollover rules into a ROTH. A relatively recent change that can be quite beneficial.

 

[cg66]

USMMA will not send out a 1098-T. The fees and equipment costs can be entered as educational expenses though. The biggest expenses are obvious, though there are some gray area expenses. The IRS 529 documentation doesn't cover all of the scenarios in the greatest detail and isn't always very clear. As mentioned above, service academies (or any scholarship situation) allow you to withdraw the 529 value without the penalty, although I believe you still pay taxes on the growth. (If anyone has a source on not paying tax at all, and if any tax software captures that, please share!) The Roth IRA conversion option is great new feature that came out in the last year or so.

 

[RowingMom]

We did withdraw from 529 and DS had to pay taxes on growth but no penalties. Turbo tax did actually account for him being at service academy.

 

[futureusmcmom24]

Thank you SO much everyone! Very helpful information!

 

[JohnPAKP65]

The timing of the 529 withdrawal can be critical. You should withdraw and spend the money withdrawn in the same calendar year, not academic year;. If you don’t you will have mismatched reporting with the IRS, and your withdrawals, even for qualified education expenses, may be subject to tax and penalties. An excellent resource on 529’s can be found at 529’s, everything you need to know

 

[CJ23]

My 529 plan allows me to send a check directly to our bank so we can pay, and directly to the institution. It's much easier than I thought. It just says to keep all receipts. : )