<p>My D starts college in the fall and I have the fall term fully funded. I have a good amount in a 529 account as well as another large amount in Savings Bonds. I’m still funding the 529 account to the tune of $400/month. Fall payment is due in August and the spring term payment is due in December…but was told by the Business Office that the spring payment could be made in early January. </p>
<p>Anyway, I have around an additional $1K/month I can contribute to some type of account. For the fall payment I will pay the balance by check and then take the AOC for this tax year. For the spring payment I would like to defer the payment until early January so that I can get that amount on next years taxes using the AOC. However, I won’t have the full amount due for the spring term in the form of cash. I’m just wondering if I should just put that extra $1K/month into the 529 account along with the $400/month? Or should I deposit the money into some other type of safe account and use whatever I accumulate between now and January as partial payment for the spring term? The 529 money is invested in a safe vehicle since I can’t be too aggressive and take the chance of losing a portion of what I have in there. </p>
<p>I would prefer not to start using the 529 money until at least the sophomore year. The savings bonds will be the last money I need to tap.</p>
<p>Thanks in advance for any information and advice.</p>
<p>Have you considered setting up a monthly payment plan with your college? Most have payments starting in July so you would have 6 payments done by the end of the year. </p>
<p>^^ That’s one option, but I’d like to avoid the $65 sign-up fee.</p>
<p>^^Your can’t claim AOTC if you’re paying the education expenses with 529 funds. See IRS Pub 970</p>
<p>OP did say that for fall, she’s going to pay the balance (presumably $4,000 at a minimum) by check in order to take the AOTC. You are right, she does need to watch out for paying $4k out-of-pocket with non tax-advantaged $ in 2015 in order to get the credit for the second calendar year.</p>
<p>4kids is correct about the credit and 529 accounts. </p>
<p>Thanks everyone for the responses. I was going to pay a “portion” of the balance for the spring semester out of pocket (miniumum $4K) with non 529 funds, and possibly pay the remainder with 529 funds. I would like to be able to get the credit for 2015 tax year. I hope I explained this right.</p>
<p>It sounds like you’re aware of the issues. If you have $4k in non-taxed advantaged QEE in fall, then that’s all you need and paying for spring in January would be the thing to do. Then you have two semesters in 2015 and subsequent years to get the $4k of non-taxed advantaged QEE. The tax-advantaged items would be any scholarships/grants, 529 distributions and savings bond proceeds if you claim the interest exclusion. The 529 distributions can be put toward room and board. Just be sure to take the 529 distributions and cash in the bonds in the same tax year as the expenses are incurred and paid. For example, if you pay spring QEE in January you need to either be able to get the 529 distribution shortly after Jan. 1 and before payment is due or have the cash flow to pay and get the 529 distribution afterwards.</p>
<p>As far as where to invest the additional money, if the 529 funds are in conservative investments they probably aren’t earning much. So if you can’t get a distribution in January in time to pay the bill and don’t have the cash flow to get reimbursed later, you may want to keep the new money out of the 529.</p>