Author Topic: Helping my sister pay for MCAT Prep ($2300) - Is a 529 Account the Right Option?  (Read 5326 times)

minority_finance_mo

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Hi,

I'm helping my sister pay for an MCAT prep course (cost to me will be around $3200), and I'm wondering if I can take advantage of any tax-advantaged accounts in this scenario. Here's a little bit of background:

Transaction Date: January, 2017
My Income (Pre-Tax) for 2016: ~100K
AGI (estimate):  ~65K
Full Cost of Course: $2300

I am not her legal guardian.

We've done our research and are not looking for other options at the moment. Just wondering if there are some tax acrobatics I can take advantage of with this transaction. Is a 529 Account the right option? Anything else I should consider?
« Last Edit: December 11, 2016, 01:11:39 PM by Hey It's Moe »

seattlecyclone

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Does your state give you a tax deduction for 529 contributions? If not, you won't get much benefit from opening a 529 for such a short time period. The main benefit of a 529 is tax-free growth over time. Money that you'll spend next month wouldn't benefit much from that at all.

johnny847

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I doubt that this is a qualified higher education expense

Quote

Qualified education expenses.   These are expenses related to enrollment or attendance at an Eligible educational institution (defined later). As shown in the following list, to be qualified, some of the expenses must be required by the institution and some must be incurred by students who are enrolled at least half-time. See Half-time student , later.
The following expenses must be required for enrollment or attendance of a Designated beneficiary (defined later) at an eligible educational institution.

Tuition and fees.

Books, supplies, and equipment.

Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible educational institution.

Expenses for room and board must be incurred by students who are enrolled at least half-time.

The expense for room and board qualifies only to the extent that it isn't more than the greater of the following two amounts.

The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.

The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.

You may need to contact the eligible educational institution for qualified room and board costs.

The purchase of computer or peripheral equipment, computer software, or Internet access and related services if it is to be used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible educational institution. (This does not include expenses for computer software for sports, games, or hobbies unless the software is predominantly educational in nature.)

Kakashi

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I'm pretty sure this will not qualify with 529.  Unless the MCAT prep is held as a course in a community college or something. 

From the IRS website:
Eligible educational institution.   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions.

Most of these prep courses are run by for-profit private companies like Kaplan or Princeton Review, and hence don't qualify as an eligible educational institution. 

I don't think there're really any options but to pay it with normal (after tax) dollars

minority_finance_mo

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Thanks everyone, appreciate the input! Sounds like I'm stuck paying post-tax.