I saw your original question awhile back, here: http://forum.savingforcollege.com/t/questions-about-paying-future-years-tuition-from-529/11620
However, the IRS has never provided any formal guidance regarding the prepayment of tuition. There are several reasons not to prepay to begin with:
- Tax benefits (deductions and credits)
- Prepayment risk (tuition declining or growing at a rate below your potential earnings)
- The beneficiary transferring schools, dropping out, etc.
That said, maybe you're trying to lock in a particular rate or the school is offering you a deal. Either way, you will not get clear guidance from the IRS.
To me it would seem that if you are paying tuition for a student who is enrolled at least half time, even if you're paying in advance, that's the whole point of the 529 plan. I'd be surprised if the IRS gave you a hard time for paying tuition with a college savings plan! To be safe, I'd suggest checking in with the plan sponsor (the state that sponsors your particular plan) to see if they have any guidance. The sponsor is usually an arm of the State Treasury or a dedicated agency.
VP, Research & Development
This information does not constitute tax advice and is provided for informational purposes only. Please consult your tax advisor, financial advisor, local taxing authority, and/or plan provider or sponsor for more information.