Author Topic: 529 question  (Read 1081 times)

purple monkey

  • Bristles
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529 question
« on: February 17, 2017, 10:21:29 AM »
We live in state A and have been able to use state 529 deductions for last 3 years.

Previous account was from another state and we did not get the state deduction at any point.

Child will be going to state A university.  But we will be moving out of state A to state D when child goes to school. Child will live in family owned house in state A.

We will file taxes in state D.

When we make the withdrawals, is there a penalty due to us no longer living in the state?



  • 5 O'Clock Shadow
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Re: 529 question
« Reply #1 on: February 18, 2017, 08:59:22 AM »
While you may want to call the plan administrator to confirm, there should be no penalty associated with the withdrawals used for tuition, housing, etc associated with state A university. Each year you are considered a resident of state A, you can deduct some portion of contributions from State A taxes. When you move and are no longer a State A resident, you would no longer take the deduction. This is a separate issue from withdrawals for college expenses.

Of note, generally when you do your taxes if you drew money out of the 529 for college expenses, you will receive a 1099-Q. Hold on to this document AND receipts that match the amount (tuition, books, laptop, housing, meals required to be purchased if living on campus). The IRS will likely send a letter after you file taxes, asking for those receipts. You dont provide the proof with your taxes, only when asked by IRS.

My experience is working for a broker on the 529 plans team a few years ago.