Paying tuition bill

[Anonymous]

My first bill is due. Planning to pay in quarters. I have some $$ (about two years worth) in 529s and plan to pay the rest from other savings/investments. Any rhyme or reason to what to spend down first? Should I pay year 1 from 529 or just split each year from 529 and other funds?

I can't think of a rationale to one or the other so it may not matter?

[Anonymous]

If you’re sure DC is going back next year I guess you could pay cash and use 529 later. If not sure that DC would return and this is a trial run, then use 529 now.

[Anonymous]

Consider the capital gains tax impact of cashing in savings/investments vs withdrawing from the 529. Any accountants here to answer?

[Anonymous]

Get rid of that 529. Let your investments grow. If they grow faster/better return (mine do) that interest on student loans, I'd take out loans and pay them later.

[Anonymous]

I'd mix 529 and other sources every year. Maybe 529 for one semester then out of pocket/savings for the second semester.

[Anonymous]

We burned through the 529 first then paid out of pocket.

[Anonymous]

If it were me, I'd spend down 529 first. The only reason I'd consider a mix of other resources would be capital gains (I imagine that is unlikely to be an issue) or if you could avoid bumping into a higher tax bracket by spreading withdrawals from other accounts.

[Anonymous]

I am wondering the same thing. My kid is a sophomore, and I can pay for two years with 529s and can pay the rest out of pocket. I'm leaning towards just paying out of 529s first, draining those accounts, then moving to investments to pay for senior year.

My thought process is that I can only use the 529s for one thing, and I may as well use it now and use them all up.

For my other sources of funds - a small Roth IRA, I bonds, and other mutual funds - I will have to pay taxes on the earnings, but I can adjust to pick the funds that have the lowest taxes, and I have flexibility on which ones I use. And I don't pay a penalty if I end up not using all the funds I have allotted for college.

The alternative is that if I let the 529s sit for two more years and use those last, I get two extra years of non-taxable gains.

[Anonymous]

Anonymous wrote:We burned through the 529 first then paid out of pocket.

same here

[Anonymous]

use the 529 first. Save your personal assets until absolutely needed.

[Anonymous]

I'm not sure if this is still true, but when we were paying there was an American Opportunity tax credit that you can't "double dip" with 529 funds so it makes sense to pay each year up to the full amount of the tax credit with your personal funds. I think there are income limits--like below 180k HHI. I think there may be other educational credits depending on your situation. So time with those in mind if they apply to your situation.

[Anonymous]

Anonymous wrote:My first bill is due. Planning to pay in quarters. I have some $$ (about two years worth) in 529s and plan to pay the rest from other savings/investments. Any rhyme or reason to what to spend down first? Should I pay year 1 from 529 or just split each year from 529 and other funds?

I can't think of a rationale to one or the other so it may not matter?

Which state? We put the money into the 529 and pull it out right away to pay tuition, effectively using outside funds but funneling it through the 529 for the tax benefit. In Virginia you can put in 34K without worrying about gift tax and get a 5.75% tax rebate. If you live in VA, I'd spend down the 529 first and then fund/pull to pay tuition.

[Anonymous]

Anonymous wrote:

Anonymous wrote:My first bill is due. Planning to pay in quarters. I have some $$ (about two years worth) in 529s and plan to pay the rest from other savings/investments. Any rhyme or reason to what to spend down first? Should I pay year 1 from 529 or just split each year from 529 and other funds?

I can't think of a rationale to one or the other so it may not matter?

Which state? We put the money into the 529 and pull it out right away to pay tuition, effectively using outside funds but funneling it through the 529 for the tax benefit. In Virginia you can put in 34K without worrying about gift tax and get a 5.75% tax rebate. If you live in VA, I'd spend down the 529 first and then fund/pull to pay tuition.

+1 Our original 529 investment is gone, but we transferred 20k into it (cash/money market) to pay fall tuition so we could get the state tax benefit.

[Anonymous]

Which state? We put the money into the 529 and pull it out right away to pay tuition, effectively using outside funds but funneling it through the 529 for the tax benefit. In Virginia you can put in 34K without worrying about gift tax and get a 5.75% tax rebate. If you live in VA, I'd spend down the 529 first and then fund/pull to pay tuition.

Tuition and medical costs are not considered gifts.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My first bill is due. Planning to pay in quarters. I have some $$ (about two years worth) in 529s and plan to pay the rest from other savings/investments. Any rhyme or reason to what to spend down first? Should I pay year 1 from 529 or just split each year from 529 and other funds?

I can't think of a rationale to one or the other so it may not matter?

Which state? We put the money into the 529 and pull it out right away to pay tuition, effectively using outside funds but funneling it through the 529 for the tax benefit. In Virginia you can put in 34K without worrying about gift tax and get a 5.75% tax rebate. If you live in VA, I'd spend down the 529 first and then fund/pull to pay tuition.

+1 Our original 529 investment is gone, but we transferred 20k into it (cash/money market) to pay fall tuition so we could get the state tax benefit.

Planning on doing this with my DC529....but does anybody know how long the money has to be in the account? Can I deposit $8,800 into a 529 today, take it out tomorrow, and still get the DC tax deduction for that full amount?