Scholarship Stipend and 529 Plan

ccccguideg
Mon, 04 Sep 2017 22:11:07 +0000

It’s very complicated with the stipends. The tax form the University sends will show the amount reduced by the stipend. It is probably less expensive for your student to just pay taxes on the stipend amount you end up using for non-QEE expenses and then if you get audited you will be fine. Assuming you can’t use the 529 funds for a sibling which would be much less complicated. We have a stipend situation and excess 529 funds so we have been dealing with this as well. Even good professional financial and tax advisors have not felt totally confident about their answers to our questions. They have just told us to account for every single penny every year with receipts and proof of taxes paid for the excess stipend. The worst other penalty to be incurred if we were audited and found in the wrong would be the 10% 529 withdrawal penalty because there would be sufficient proof that the situation wasn’t fraudulent.