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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12009
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I have a MN 529 son who will be starting college this fall.

Customer Question

I have a MN 529 for my son who will be starting college this fall. I was thinking of just withdrawing money from the 529 and paying the tuition myself. Then I read where it may pay to disperse the money directly to my son and have him pay the tuition. Which way do you advise and why? Does the dispersement increase my income level and push me into another tax bracket? Also, I'm thinking of paying the first year tuition out of my savings and keep the 529 growing. Any reason from a tax perspective that I should not do so?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Hi,

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As long as the withdrawals are used for the following, there's not 10% and the earnings ate tax free.

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Tuition and feesBooksEquipment required for course enrollment (including special needs equipment)Some room and board expensesNon-qualified withdrawals include:Transportation costsComputers (unless the school requires them)Student loan repayments...So as long as the dollars are used FOR one of these items, , you'll be using the dollars as intended (in terms of 529 pans)...And remember, only the earnings portion of a non-qualified withdrawal is subject to a 10% withdrawal penalty...It would be pulling the dollars and using them for Other reasons that would cause the tax abe penalty on earnings...In THAT case then here are spme thoughts:...
    Change the beneficiary to another qualifying family member who is planning go to collegeHold the funds in the account in case the beneficiary wants to attend grad school laterMake yourself the beneficiary and further your own education
Expert:  Lane replied 1 year ago.

Let me know what questions you have from here

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Lane

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Expert:  Lane replied 1 year ago.

Sorry for the typos above ... looks like the formatting didn't transfer well either.

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Regardless, as long as the dollars are used for qualifed eduaton expenses you won't have those taxes and tax penalties on earnings.

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Let me know if you still have questions.

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Lane

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