Plan your 529 account withdrawals

Plan your 529 account withdrawals

January is the start of a new college semester, and parents and grandparents may want a refresher course on 529 college savings plan withdrawals. Here are two things to consider.

• Qualified withdrawals are tax-free. "Qualified" withdrawals are those you use to pay for college education expenses such as tuition, fees, books, supplies, and equipment. Be aware that some withdrawals may be taxable, such as when the account beneficiary receives a scholarship or other tax-free assistance. In addition, you must coordinate 529 withdrawals with Hope and lifetime learning credits, as well as distributions from Coverdell education savings accounts. These rules prevent the use of the same expenses to obtain multiple tax benefits.

• Non-tax implications may affect timing of withdrawals. Financial aid may play a role in when you take money from your 529 account. For example, when grandparents own a 529 plan, withdrawals to pay for a student-grandchild's college costs may affect the amount of income the grandchild must report on a federal financial aid form.
  
  Planning for this generally means waiting to use grandparent-owned 529 funds in the student's last year or two, or transferring ownership of the account to the student's parents. A recent change to financial aid rules may also help. Starting with the 2017-2018 school year, the federal financial aid form will use income data from an earlier tax year than is used under the present rules. This change means some financial gifts — such as distributions from grandparent-owned 529 plans — may be made earlier.

Please give us a call to discuss how this change to the capitalization and repair regulations will affect your business and what you need to do to update your accounting policy.We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, and all Chicago land area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain.Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Online Advisor Newsletters, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Art Bradley CPA & Janice Papais CPA 
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720
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