Okay to pay Spring Term 2020 off-campus rent in Dec. 2019 when due?

Tstew 2019-11-04 15:49:11 UTC #1

Hi,

My daughter lives in an off-campus apartment. I paid her Fall semester 2019 rent with 529 funds in August 2019. No sweat.

But her Spring semester rent (for Jan-May 2020) is due per lease on Dec. 1, 2019. Can I pay it then or must I try to get landlord to let me pay it in 2020? I know there's a rule about paying expenses in year incurred but I'm not sure it applies to this situation?

Thanks in advance.

Mark_Kantrowitz_SFC 2019-11-04 18:55:55 UTC #2

If you have a bill for a qualified expense due this year, you can use 529 plan funds to pay the bill this year. The qualified distribution must be paid in the same year as the qualified expense is billed, not the year that it is used.

Tstew 2019-11-04 19:52:05 UTC #3

Thanks. The rental management company is rather inflexible so glad that I don't have to argue with them over this.

dcandmc 2019-11-05 15:57:25 UTC #4

This is somewhat ambiguous (at least to me). The 529 distribution must be taken in the same year that the corresponding qualified expense is actually paid, not necessarily in the same year that the qualified expense was billed.

Example: the college sends and the student receives in December 2019 a bill for tuition, room and board for the spring semester that begins in January 2020. If the bill is paid in December, the corresponding 529 distribution to fully or partially pay/reimburse these qualified expenses must be taken in 2019. If the bill is paid in January, the corresponding 529 distribution to fully or partially pay/reimburse these qualified expenses must be taken in 2020.

Chris 2019-12-09 16:08:24 UTC #5

Ok so which is correct? I’m about to pay a tuition bill for the 2020 semester....

dcandmc 2019-12-09 20:55:55 UTC #6

If in 2019 you're going to pay a bill for any qualified expense using 529 funds, just make sure the 529 distribution to cover the expense was taken in 2019. It doesn't matter if the expense is for something that will be received (housing, meals, etc.) or take place (college classes) in 2020.

Chris 2019-12-09 22:07:12 UTC #7

So it seems after reading this that I am ok to pay the tuition bill that is due Dec. 11th, 2019 for classes that start January 2020.

dcandmc 2019-12-09 22:40:47 UTC #8

You can pay the bill whenever you want. If you want to pay the bill this month (December, 2019) using 529 funds and avoid issues with the IRS, the withdrawal from the 529 to pay or reimburse payment of the bill must happen in 2019. It's pretty simple. Don't overthink it.