Can I deposit money into a 529 and withdraw for expenses in the same year?
If I have:
- Spent $5k in eligible education expenses on January 1st, 2018
- Deposited $5k into my 529 for 2018 on December 31st
am I able to immediately withdraw that $5k to pay for the educational expenses and simultaneously deduct the $5k off my 2018 income taxes?
I am in Iowa, though I'm not sure that is relevant to this question (it means I can fully deduct the $5k I guess since I am married).
united-states college 529-plan
asked Jan 1 at 2:34
user372895986472user372895986472
1133
add a comment |
If I have:
- Spent $5k in eligible education expenses on January 1st, 2018
- Deposited $5k into my 529 for 2018 on December 31st
am I able to immediately withdraw that $5k to pay for the educational expenses and simultaneously deduct the $5k off my 2018 income taxes?
I am in Iowa, though I'm not sure that is relevant to this question (it means I can fully deduct the $5k I guess since I am married).
united-states college 529-plan
asked Jan 1 at 2:34
user372895986472user372895986472
1133
add a comment |
If I have:
- Spent $5k in eligible education expenses on January 1st, 2018
- Deposited $5k into my 529 for 2018 on December 31st
am I able to immediately withdraw that $5k to pay for the educational expenses and simultaneously deduct the $5k off my 2018 income taxes?
I am in Iowa, though I'm not sure that is relevant to this question (it means I can fully deduct the $5k I guess since I am married).
united-states college 529-plan
asked Jan 1 at 2:34
user372895986472user372895986472
1133
If I have:
- Spent $5k in eligible education expenses on January 1st, 2018
- Deposited $5k into my 529 for 2018 on December 31st
am I able to immediately withdraw that $5k to pay for the educational expenses and simultaneously deduct the $5k off my 2018 income taxes?
I am in Iowa, though I'm not sure that is relevant to this question (it means I can fully deduct the $5k I guess since I am married).
united-states college 529-plan
united-states college 529-plan
asked Jan 1 at 2:34
user372895986472user372895986472
1133
asked Jan 1 at 2:34
user372895986472user372895986472
1133
asked Jan 1 at 2:34
user372895986472user372895986472
1133
asked Jan 1 at 2:34
user372895986472user372895986472
1133
asked Jan 1 at 2:34
user372895986472user372895986472
1133
1133
add a comment |
add a comment |
1 Answer
1
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Contributions to a 529 plan are not deductible at the federal level, the tax advantage is that earnings in a 529 are not taxed if used for qualified education expenses. So, there would be no point in contributing and withdrawing immediately unless your state happens to have a 529 deduction.
Iowa happens to be a state that does have a 529 plan deduction, if you are enrolled in one of Iowa's plans:
Iowa taxpayers who are Participants can deduct up to $3,319 for 2018
(adjusted annually for inflation) of their contributions per
Beneficiary, including rollovers, in determining their adjusted gross
income for Iowa income tax purposes. This deduction applies to each
Beneficiary account they own and contribute to. For example, married
Participants who contribute to separate accounts on behalf of their
two children can deduct up to $13,276 (4 x $3,319) in 2018. **
I've read that some state deductions are based on the net, so a contribution and withdrawal in same year for same amount would negate any deduction, but I do not see any indication that this is the case for Iowa.
From the IRS perspective, the expenses being paid in January and reimbursed in December
of the same calendar year is not problematic, there may be rules specific to your plan that cause a problem for you.
The only certain hitch is that contributions aren't available for withdrawal immediately, you'd need a minimum of 7 business days:
If you make a contribution by check, recurring contribution or
electronic bank transfer, the money will be available for withdrawal
after 7 business days.
answered Jan 1 at 3:57
Hart COHart CO
27.2k16481
add a comment |
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Contributions to a 529 plan are not deductible at the federal level, the tax advantage is that earnings in a 529 are not taxed if used for qualified education expenses. So, there would be no point in contributing and withdrawing immediately unless your state happens to have a 529 deduction.
Iowa happens to be a state that does have a 529 plan deduction, if you are enrolled in one of Iowa's plans:
Iowa taxpayers who are Participants can deduct up to $3,319 for 2018
(adjusted annually for inflation) of their contributions per
Beneficiary, including rollovers, in determining their adjusted gross
income for Iowa income tax purposes. This deduction applies to each
Beneficiary account they own and contribute to. For example, married
Participants who contribute to separate accounts on behalf of their
two children can deduct up to $13,276 (4 x $3,319) in 2018. **
I've read that some state deductions are based on the net, so a contribution and withdrawal in same year for same amount would negate any deduction, but I do not see any indication that this is the case for Iowa.
From the IRS perspective, the expenses being paid in January and reimbursed in December
of the same calendar year is not problematic, there may be rules specific to your plan that cause a problem for you.
The only certain hitch is that contributions aren't available for withdrawal immediately, you'd need a minimum of 7 business days:
If you make a contribution by check, recurring contribution or
electronic bank transfer, the money will be available for withdrawal
after 7 business days.
answered Jan 1 at 3:57
Hart COHart CO
27.2k16481
add a comment |
Contributions to a 529 plan are not deductible at the federal level, the tax advantage is that earnings in a 529 are not taxed if used for qualified education expenses. So, there would be no point in contributing and withdrawing immediately unless your state happens to have a 529 deduction.
Iowa happens to be a state that does have a 529 plan deduction, if you are enrolled in one of Iowa's plans:
Iowa taxpayers who are Participants can deduct up to $3,319 for 2018
(adjusted annually for inflation) of their contributions per
Beneficiary, including rollovers, in determining their adjusted gross
income for Iowa income tax purposes. This deduction applies to each
Beneficiary account they own and contribute to. For example, married
Participants who contribute to separate accounts on behalf of their
two children can deduct up to $13,276 (4 x $3,319) in 2018. **
I've read that some state deductions are based on the net, so a contribution and withdrawal in same year for same amount would negate any deduction, but I do not see any indication that this is the case for Iowa.
From the IRS perspective, the expenses being paid in January and reimbursed in December
of the same calendar year is not problematic, there may be rules specific to your plan that cause a problem for you.
The only certain hitch is that contributions aren't available for withdrawal immediately, you'd need a minimum of 7 business days:
If you make a contribution by check, recurring contribution or
electronic bank transfer, the money will be available for withdrawal
after 7 business days.
answered Jan 1 at 3:57
Hart COHart CO
27.2k16481
add a comment |
Contributions to a 529 plan are not deductible at the federal level, the tax advantage is that earnings in a 529 are not taxed if used for qualified education expenses. So, there would be no point in contributing and withdrawing immediately unless your state happens to have a 529 deduction.
Iowa happens to be a state that does have a 529 plan deduction, if you are enrolled in one of Iowa's plans:
Iowa taxpayers who are Participants can deduct up to $3,319 for 2018
(adjusted annually for inflation) of their contributions per
Beneficiary, including rollovers, in determining their adjusted gross
income for Iowa income tax purposes. This deduction applies to each
Beneficiary account they own and contribute to. For example, married
Participants who contribute to separate accounts on behalf of their
two children can deduct up to $13,276 (4 x $3,319) in 2018. **
I've read that some state deductions are based on the net, so a contribution and withdrawal in same year for same amount would negate any deduction, but I do not see any indication that this is the case for Iowa.
From the IRS perspective, the expenses being paid in January and reimbursed in December
of the same calendar year is not problematic, there may be rules specific to your plan that cause a problem for you.
The only certain hitch is that contributions aren't available for withdrawal immediately, you'd need a minimum of 7 business days:
If you make a contribution by check, recurring contribution or
electronic bank transfer, the money will be available for withdrawal
after 7 business days.
answered Jan 1 at 3:57
Hart COHart CO
27.2k16481
Contributions to a 529 plan are not deductible at the federal level, the tax advantage is that earnings in a 529 are not taxed if used for qualified education expenses. So, there would be no point in contributing and withdrawing immediately unless your state happens to have a 529 deduction.
Iowa happens to be a state that does have a 529 plan deduction, if you are enrolled in one of Iowa's plans:
Iowa taxpayers who are Participants can deduct up to $3,319 for 2018
(adjusted annually for inflation) of their contributions per
Beneficiary, including rollovers, in determining their adjusted gross
income for Iowa income tax purposes. This deduction applies to each
Beneficiary account they own and contribute to. For example, married
Participants who contribute to separate accounts on behalf of their
two children can deduct up to $13,276 (4 x $3,319) in 2018. **
I've read that some state deductions are based on the net, so a contribution and withdrawal in same year for same amount would negate any deduction, but I do not see any indication that this is the case for Iowa.
From the IRS perspective, the expenses being paid in January and reimbursed in December
of the same calendar year is not problematic, there may be rules specific to your plan that cause a problem for you.
The only certain hitch is that contributions aren't available for withdrawal immediately, you'd need a minimum of 7 business days:
If you make a contribution by check, recurring contribution or
electronic bank transfer, the money will be available for withdrawal
after 7 business days.
answered Jan 1 at 3:57
Hart COHart CO
27.2k16481
answered Jan 1 at 3:57
Hart COHart CO
27.2k16481
answered Jan 1 at 3:57
Hart COHart CO
27.2k16481
answered Jan 1 at 3:57
Hart COHart CO
27.2k16481
27.2k16481
add a comment |
add a comment |
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