529 Plan Distributions

Technical topics regarding tax preparation.
#1
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:roll: Client has two kids in college, each with a 529 plan. Kid 1 had $20,000 in educational expenses; kid 2 had $15,000 in educational expenses. Three 1099-Q's were received. Kid 1's was for $8,000; kid 2's was for $17,000; there was one in dad's name for $9,000.

Am I correct that Kid 2 will report $2,000 of excess distributions (with only proportionate earnings taxed)? Just want to make sure there is no way to net the additional expenses from kid 1 with the kid 2's excess distributions. :roll:
 

#2
Miami88  
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Are the educational expenses just what were reported from the school? There are other educational expenses that qualify that aren't reported by the school, so maybe some of those can be included.
 

#3
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No, these are all available education expenses (ie tuition, room & board, books, computer, etc.)
I have rounded the numbers for simplicity.
 

#4
Nilodop  
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I read 529(b)(3) to mean you can't net as you describe. I think the $2,000 would be taxed as non-qualified and also subject to 10% penalty. Unless the plan happens to be on the accrual method and meets the rules to accrue another $2,000. I've never heard of an accrual-method 529 plan, but ...
 

#5
philly  
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Can you roll over the excess funds of $ 2,00 into another 529 plan in order to avoid a taxable distribution. I believe you have 60 days to complete the roll over.
 

#6
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This is a 2020 return, so way beyond any rollover period unfortunately. Nilodop, I came to the same conclusion as you did. Just hoping someone knew something I did not, as these 529 plans/education expenses can be quite confusing at times (especially to me).
 


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