529 & my kid in college

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Cruncher
Posts: 163
Joined: Mon Feb 01, 2010 12:56 am

529 & my kid in college

Post by Cruncher » Wed Sep 12, 2018 12:14 pm

Morning Bogelheads,

Our daughter started college this past month. We continue to save in her VG 529 plan, as it's been automatic for a long time.

Question is: Is there any reason to continue to send money to VG, or should we just divert these current 529 deposits to her college (she's going through money like a sailor through beer on on port call). That's a nod to my sailor buds. :beer She's learning to fly.

Thanks for all replies, even from sailors.

Cruncher

PS We liquidated her EdIRA this week, haven't touched her 529 plan yet.

Spirit Rider
Posts: 8559
Joined: Fri Mar 02, 2007 2:39 pm

Re: 529 & my kid in college

Post by Spirit Rider » Wed Sep 12, 2018 12:26 pm

Cruncher wrote:
Wed Sep 12, 2018 12:14 pm
Morning Bogelheads,

Our daughter started college this past month. We continue to save in her VG 529 plan, as it's been automatic for a long time.

Question is: Is there any reason to continue to send money to VG, or should we just divert these current 529 deposits to her college (she's going through money like a sailor through beer on on port call). That's a nod to my sailor buds. :beer She's learning to fly.

Thanks for all replies, even from sailors.

Cruncher

PS We liquidated her EdIRA this week, haven't touched her 529 plan yet.
Are you referring to qualified educational expenses or lifestyle expenses. 529 for the former and cash flow (preferably hers for the latter).

If your state gives a deduction and you don't have sufficient assets in the 529. I would be running deductible cash flow/qualified educational expenses through the 529.

Cruncher
Posts: 163
Joined: Mon Feb 01, 2010 12:56 am

Re: 529 & my kid in college

Post by Cruncher » Wed Sep 12, 2018 12:38 pm

Primarily flying. Some college fees, but those were one time fees (per semester I believe).

Her (social funds) come our of her bank account. We taught her early on how to save & budget ... the investing stuff is still on our to do list. She's been babysitting, refereeing soccer matches, working at a kid's day care ... while living at home, and has a decent amount of pocket scratch to "play" with. She's also doing the soccer thing in college, good kid.

We have plenty of assets in her 529. I estimate it can cover about 2/3rds of her total 4-year college expenses, including flying. :oops: I do plan on using them all before she graduates.

We are still saving and sending money to her 529. Just wondering if we should send this to her college account vs. her 529, then drawing from the 529 as needed?

I am a NV resident, she's out of state, but within the WUE (Western Undergraduate Exchange - a tuition reduction for out-of-state students).

Thanks for the reply ... all USN jokes are that, just intra-department humor ... I'm a retired Marine and have many Navy buds.

livesoft
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Re: 529 & my kid in college

Post by livesoft » Wed Sep 12, 2018 12:56 pm

If you get a state tax break and do not lose a federal tax credit, then I would still funnel money through a 529 plan.

However, if you don't get a state tax break and you lose a federal tax credit by funneling money through a 529 plan, then I would not do that.
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Spirit Rider
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Re: 529 & my kid in college

Post by Spirit Rider » Wed Sep 12, 2018 12:58 pm

I'm a Bubblehead (74 - 80), USS Benjamin Franklin (SSBN 640).

psteinx
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Re: 529 & my kid in college

Post by psteinx » Wed Sep 12, 2018 1:03 pm

Even if you get no state tax credit/deduction, 529s are still favorable much of the time. The growth of the money, if used for qualifying purposes, should be tax-free (i.e. much better than just tax deferred). So, if you're adding money now that will be used by her in ~3 years, then you get 3 years of tax free growth.

Of course, insert the usual caveats about putting too much in, such that the excess is perhaps withdrawn with penalties.

HereToLearn
Posts: 128
Joined: Sat Mar 17, 2018 5:53 pm

Re: 529 & my kid in college

Post by HereToLearn » Wed Sep 12, 2018 1:12 pm

livesoft wrote:
Wed Sep 12, 2018 12:56 pm
If you get a state tax break and do not lose a federal tax credit, then I would still funnel money through a 529 plan.

However, if you don't get a state tax break and you lose a federal tax credit by funneling money through a 529 plan, then I would not do that.
The federal credit @livesoft correctly references here is the AOTC. $4000 of non-529 funds must be used to pay for tuition in order to claim the very generous $2500 tax credit. Can only claim for four years, so if you can pay next semester's tuition in 2018, make sure you use $4000 of your own money to pay tuition, assuming you are eligible for the AOTC.

Regarding your comment about flying.....529 cannot be used to pay for transportation or personal expenses. It can be used for tuition, R&B, laptop, textbooks and some school supplies (software), but I have not used it for supplies yet so am not well-versed on that topic. Universities include transportation & personal expenses in their COA financial aid calculation, so this is why confusion results about which expenses are included under COA, 529, and AOTC.

Cruncher
Posts: 163
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Re: 529 & my kid in college

Post by Cruncher » Wed Sep 12, 2018 1:19 pm

Thanks all!

The "flying" is at her University. It's an accredited Part 141 school within the eyes of the FAA. Her flying is training, and integral to her "BS in Aviation" degree.

I'll have to break out our 2017 tax returns ... I'm a Turbotax guy, so it shouldn't be too difficult. I'll see what (if any) tax breaks we received. I do like the idea of funneling the new funds through the 529 plan (to capture and realize any gains as tax free, for qualified education expenses).

Very good advice ladies and gents ... keep it coming!

Cruncher

HereToLearn
Posts: 128
Joined: Sat Mar 17, 2018 5:53 pm

Re: 529 & my kid in college

Post by HereToLearn » Wed Sep 12, 2018 1:25 pm

Ah....I misunderstood! I thought you meant airline tickets to travel to college!

The tax break you receive that will not appear on your income taxes is the tax-free earnings of the 529 plan. I finally moved the remainder of the 529 funds to a MM fund within the 529 paying only 1.5%, so I won't be seeing much upside for the remaining semesters, but I have enjoyed tremendous tax-free growth in the account to date. If that money were not in a 529, I could lock in a higher rate with a CD and pay income taxes on the gains.

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