529 and taxes

annoyingdad
Sat, 20 Jul 2013 21:34:47 +0000

Yes, Coverdell distributions can be used tax free to pay for R&B if the student is attending at least 1/2 time. IRS Pub 970 has all the info about college tax matters:

http://www.irs.gov/pub/irs-pdf/p970.pdf

Be aware that costs paid by grandparents must be reported on the subsequent year’s FAFSA as untaxed income to the student. I’m pretty sure profile schools and schools with their own finaid forms will ask for this info too.