529 plan question - any tax buffs here?

Question

Question about 529 plan withdrawal limits...

I am attending business school starting this summer. I am fortunate enough to have more funds than the school lists in its "cost of attendance" table. I would like to withdraw more funds from the account without incurring the tax+10% penalty. I am married and below the "cost of attendance" table in plain text they the school states "If you are married and/or have dependents, you may face higher costs. The average increase in living expenses for students with partners and/or dependents is 30% above the allowances for room and board."

Does this mean I can withdraw 30% more than the room and board allowance in the table without incurring the tax+10% penalty?

bb · Answer

Good question - I am interested as well.
Meanwhile, I did find a good post from Fidelity on 529's and how to strategically use it: https://www.fidelity.com/viewpoints/per ... 9-spending

If you can't take out the additional funds you can always roll it over and use for your kids or grand kids, etc. There are also credits that may be better used for offsetting some of the income on your tax return and using the Lifetime learning credit (I think it works for grad school... though Fidelity says college). I think you will need an accountant who knows post grad education. Hopefully there is one here.

eriginal · Answer

I'm wondering if this is one of those taxation gray areas where you just do it and if you audited by the IRS, you pay the tax and the 10% penalty. Agreed, hopefully some tax expert on here could answer.

Kelzie01 · Answer

I would confirm with the school that they are officially stating that room and board for students with dependents is 30% higher. The IRS relies on the school to set the room and board amount and if that's what the school says it is, that's what they'll go off of.

It seems like their statement might just be a general disclaimer in which case it would not be considered part of the room and board determined by the institution.

eriginal · Answer

That was the way I read it as well, but I suppose I will have to contact the institution and see how much I can get away with.

Here's another one for you - I would like to travel as a part of the schools curriculum. On the schools website they state the following about the trips: "Global business concepts are explored across the MBA curriculum. You can select from a wide range of options for international study and work experiences. Note: The cost of these options is in addition to the budget above. If you plan to participate in a Global Trek, please be aware that your Wharton MBA Student Budget may only be increased for education-related trips, such as Wharton’s Global Immersion Program and Global Modular Courses (GMC). For additional information, visit Global Learning."

The way this reads makes me think that certain global trips CAN be included in the cost of attendance, but the 30% increase does not as it does not explicitly state that it is included in the cost of attendance. Thoughts?

Kelzie01 · Answer

Mostly. ONLY the education-related trips. If Wharton has a spring break trip to Cancun, that's not covered. :-D

Tuition and room and board for study abroad programs are covered. Airline tickets are not though-neither are some potentially pricey things like foreign health insurance.

eriginal · Answer

So just to confirm your thinking, any education-related trips outside of the normal cost of attendance can likely be added to the normal cost of attendance? Put another way, if the stated cost of the trip is $5k, I can add that to the $100k stated cost of attendance for the purposes of a 529 plan?

Kelzie01 · Answer

Yeah but be careful with what's included in that stated cost-if that includes airline tickets, you can't add that to the cost of attendance.

bb · Answer

Can it be any "educational" trip or does it have to be a "required" educational trip? Similar to the Laptop situation that it has to be required by the program to be included in the costs.

Kelzie01 · Answer

As long as you are earning credits, it's fine. If it's some sort of working abroad where you don't earn credits that probably wouldn't be covered. I wouldn't attempt it anyway.

eriginal · Answer

Perfect. Yea, they have an all-in stated cost that does not include airline tickets. What I'm gathering here is that they need to be very explicit otherwise it can't count towards the cost of attendance. Seems like the +30% doesn't count and the educational-related travel does. I emailed the school and I will post on here once I get a response.

VeritasPrepMike · Answer

Sounds like you should be good. You can also think about keeping some of the 529 funds in there for your children or grandchildren down the road. Would sure be a nice present for them!

529 plan question - any tax buffs here?

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