529s -- Does it make a difference if you pay the school directly or have a check sent to you and then pay

My child’s school allows the option of using a 529 to pay electronically (rather than having the money withdrawn from you bank account). Is there any benefit of one option over the other – ie paying the tuition directly from a 529, or alternatively, making a withdrawal from the 529, having the check sent to you, depositing it in your account and paying the tuition electronically from you bank account?

Both methods will work, however making the payment directly from your 529 account is the safest way to do it from the perspective of removing any ambiguity about what the payment was for…and verified by a 3rd party.

If the “you” in “have a check sent to you” is the parent, then yes, it does make a difference, although in the end there may not be much of a distinction as long as all the 529 funds are used for qualified expenses.

529 funds sent directly to the school will be reported on the 1099-Q under the student’s SSN, and any earnings will be taxable to the student if the distribution is not used for a qualified purpose. If a check is sent to a parent, the distribution will be reported on the 1099-Q under the parent’s SSN, and any earnings will be taxable to the parent if the distribution is not used for a qualified purpose.

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So either if it goes to the parent or the student (via the school) you have to verify that is a qualified expense. As long as you show you paid tuition, that isn’t a big deal, right?

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It just makes the record keeping a little more complex. As long as you keep the receipts matched and balanced, you’ll be fine.

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It’s not a big deal as long as 100% of any 529 distribution is used for qualified expenses. There is no routine 3rd party (IRS) verification that 529 funds are being used for qualified expenses. You just need to be cognizant of how and when the 529 funds are being spent, and be prepared to substantiate those expenses and payments if the IRS has questions.

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I’ve always wondered what people do about the fact that a small part of the bill is often for non-qualified expenses, such as certain fees (for example what shows up on my kid’s 1098-T is typically $20-$30 less per term than the amount billed). Do you pay that separately? We don’t even know exactly how much it is when the bill is posted. Our solution has been to withdraw slightly less than the amount of the bill, and then pay the full amount from our bank account, but that wouldn’t work if we sent the money direct from the 529, we’d have to make two separate payments.


Here’s how I have done it:
-School posts itemized bill.
-529 distribution covering the qualified expenses is electronically transferred to the student’s checking account.
-Funds from a non-529 source are transferred to the student’s checking account to cover non-qualified expenses.
-The student writes a check to the school to cover all billed expenses.
-Keep any records needed to document this process.
-Rinse and repeat each semester.

Interesting about the qualified and non-qualified expenses. My student’s bill includes tuition, housing room charge, an undergraduate activity fee and a student health and wellness fee. Are all those not qualified expenses?

Health and wellness fees may or may not be (remember health insurance is not a qualified expense). Anything that isn’t mandatory is probably not qualified. My S’s bill has about 6-8 small fees, some of which are from the students’ union. The major ones from the university are qualified (including the activity fee), some of the student union fees are not (such as an optional $10 fee to help students suffering from food/housing insecurity).

I’ve always had checks sent to me, and I’ve paid the bills directly. Mostly because I don’t necessarily want to withdraw funds at the same time tuition is due, for various investment reasons. As long as it’s in the same calendar year, it’s fine.

It also addresses the issue of a mix of expenses - I write one check and make one 529 withdrawal, possibly for a different amount. This came in handy last year when part of the tuition/fee was refunded late in the school year.

It requires two offsetting entries in my tax software, but that’s about it.

But sending it directly is fine if you’re not concerned about these topics.

The term “qualified education expense” has different definitions depending on which tax incentive is being considered, but generally a student health and wellness fee is not a qualified education expense for any tax incentive. Room and board is a QEE for a 529 (as long as the student is attending at least half-time), but is not a QEE for any of the other tax incentives.

Thank you for starting this thread - I had just planned to try to have the 529 pay directly and I would have missed that the student fees aren’t allowable. I just got the tuition bill today (!!) and I see that it is actually easier to have the 529 electronically transfer the correct amount (minus the fees) to me and then for me to pay the school electronically. The other ways all involve paper checks, which are more time consuming to keep an eye on. This will be easier than I thought it would be (referring to just the logistics, of course. :))

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Some fees are not 529 qualified expenses. Generally, a “Student Activity Fee” is a qualified expense. Directly billed fees for “transportation” or pretty much anything health related are not qualified expenses (generally speaking - there may be exceptions based on specific circumstances).


Thank you, very helpful. Ok so I just read that any required student fee (not health or transport) qualifies, does that sound right?

Any required fees should be QEE. IRS Form 970 is a key reference (after belknappoint!), so take a look at that (in your spare time😂)

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And on-campus housing too, right?

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Thanks! I skimmed through the document looking for just a list of QEEs, including all the detail in the index and couldn’t find one, lol. (or even a reference to 529s). I will rehydrate and try again later. :joy:

Be careful here. Some fees that a school may require for enrollment or attendance are not Qualified Education Expenses for 529 purposes (or for that matter the other education tax incentives).


Room and board is a 529 qualified expense for students who are at least half-time (as defined by their school), but not a qualified expense for any of the other education tax incentives.