Can I deposit money into a 529 and withdraw for expenses in the same year?












1














If I have:




  • Spent $5k in eligible education expenses on January 1st, 2018

  • Deposited $5k into my 529 for 2018 on December 31st


am I able to immediately withdraw that $5k to pay for the educational expenses and simultaneously deduct the $5k off my 2018 income taxes?



I am in Iowa, though I'm not sure that is relevant to this question (it means I can fully deduct the $5k I guess since I am married).










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    1














    If I have:




    • Spent $5k in eligible education expenses on January 1st, 2018

    • Deposited $5k into my 529 for 2018 on December 31st


    am I able to immediately withdraw that $5k to pay for the educational expenses and simultaneously deduct the $5k off my 2018 income taxes?



    I am in Iowa, though I'm not sure that is relevant to this question (it means I can fully deduct the $5k I guess since I am married).










    share|improve this question







    New contributor




    user372895986472 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
    Check out our Code of Conduct.























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      1








      1


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      If I have:




      • Spent $5k in eligible education expenses on January 1st, 2018

      • Deposited $5k into my 529 for 2018 on December 31st


      am I able to immediately withdraw that $5k to pay for the educational expenses and simultaneously deduct the $5k off my 2018 income taxes?



      I am in Iowa, though I'm not sure that is relevant to this question (it means I can fully deduct the $5k I guess since I am married).










      share|improve this question







      New contributor




      user372895986472 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
      Check out our Code of Conduct.











      If I have:




      • Spent $5k in eligible education expenses on January 1st, 2018

      • Deposited $5k into my 529 for 2018 on December 31st


      am I able to immediately withdraw that $5k to pay for the educational expenses and simultaneously deduct the $5k off my 2018 income taxes?



      I am in Iowa, though I'm not sure that is relevant to this question (it means I can fully deduct the $5k I guess since I am married).







      united-states college 529-plan






      share|improve this question







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      user372895986472 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
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      share|improve this question







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      asked 4 hours ago









      user372895986472

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          Contributions to a 529 plan are not deductible at the federal level, the tax advantage is that earnings in a 529 are not taxed if used for qualified education expenses. So, there would be no point in contributing and withdrawing immediately unless your state happens to have a 529 deduction.



          Iowa happens to be a state that does have a 529 plan deduction, if you are enrolled in one of Iowa's plans:




          Iowa taxpayers who are Participants can deduct up to $3,319 for 2018
          (adjusted annually for inflation) of their contributions per
          Beneficiary, including rollovers, in determining their adjusted gross
          income for Iowa income tax purposes. This deduction applies to each
          Beneficiary account they own and contribute to. For example, married
          Participants who contribute to separate accounts on behalf of their
          two children can deduct up to $13,276 (4 x $3,319) in 2018. **




          I've read that some state deductions are based on the net, so a contribution and withdrawal in same year for same amount would negate any deduction, but I do not see any indication that this is the case for Iowa.



          From the IRS perspective, the expenses being paid in January and reimbursed in December
          of the same calendar year is not problematic, there may be rules specific to your plan that cause a problem for you.



          The only certain hitch is that contributions aren't available for withdrawal immediately, you'd need a minimum of 7 business days:




          If you make a contribution by check, recurring contribution or
          electronic bank transfer, the money will be available for withdrawal
          after 7 business days.







          share|improve this answer





















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            Contributions to a 529 plan are not deductible at the federal level, the tax advantage is that earnings in a 529 are not taxed if used for qualified education expenses. So, there would be no point in contributing and withdrawing immediately unless your state happens to have a 529 deduction.



            Iowa happens to be a state that does have a 529 plan deduction, if you are enrolled in one of Iowa's plans:




            Iowa taxpayers who are Participants can deduct up to $3,319 for 2018
            (adjusted annually for inflation) of their contributions per
            Beneficiary, including rollovers, in determining their adjusted gross
            income for Iowa income tax purposes. This deduction applies to each
            Beneficiary account they own and contribute to. For example, married
            Participants who contribute to separate accounts on behalf of their
            two children can deduct up to $13,276 (4 x $3,319) in 2018. **




            I've read that some state deductions are based on the net, so a contribution and withdrawal in same year for same amount would negate any deduction, but I do not see any indication that this is the case for Iowa.



            From the IRS perspective, the expenses being paid in January and reimbursed in December
            of the same calendar year is not problematic, there may be rules specific to your plan that cause a problem for you.



            The only certain hitch is that contributions aren't available for withdrawal immediately, you'd need a minimum of 7 business days:




            If you make a contribution by check, recurring contribution or
            electronic bank transfer, the money will be available for withdrawal
            after 7 business days.







            share|improve this answer


























              2














              Contributions to a 529 plan are not deductible at the federal level, the tax advantage is that earnings in a 529 are not taxed if used for qualified education expenses. So, there would be no point in contributing and withdrawing immediately unless your state happens to have a 529 deduction.



              Iowa happens to be a state that does have a 529 plan deduction, if you are enrolled in one of Iowa's plans:




              Iowa taxpayers who are Participants can deduct up to $3,319 for 2018
              (adjusted annually for inflation) of their contributions per
              Beneficiary, including rollovers, in determining their adjusted gross
              income for Iowa income tax purposes. This deduction applies to each
              Beneficiary account they own and contribute to. For example, married
              Participants who contribute to separate accounts on behalf of their
              two children can deduct up to $13,276 (4 x $3,319) in 2018. **




              I've read that some state deductions are based on the net, so a contribution and withdrawal in same year for same amount would negate any deduction, but I do not see any indication that this is the case for Iowa.



              From the IRS perspective, the expenses being paid in January and reimbursed in December
              of the same calendar year is not problematic, there may be rules specific to your plan that cause a problem for you.



              The only certain hitch is that contributions aren't available for withdrawal immediately, you'd need a minimum of 7 business days:




              If you make a contribution by check, recurring contribution or
              electronic bank transfer, the money will be available for withdrawal
              after 7 business days.







              share|improve this answer
























                2












                2








                2






                Contributions to a 529 plan are not deductible at the federal level, the tax advantage is that earnings in a 529 are not taxed if used for qualified education expenses. So, there would be no point in contributing and withdrawing immediately unless your state happens to have a 529 deduction.



                Iowa happens to be a state that does have a 529 plan deduction, if you are enrolled in one of Iowa's plans:




                Iowa taxpayers who are Participants can deduct up to $3,319 for 2018
                (adjusted annually for inflation) of their contributions per
                Beneficiary, including rollovers, in determining their adjusted gross
                income for Iowa income tax purposes. This deduction applies to each
                Beneficiary account they own and contribute to. For example, married
                Participants who contribute to separate accounts on behalf of their
                two children can deduct up to $13,276 (4 x $3,319) in 2018. **




                I've read that some state deductions are based on the net, so a contribution and withdrawal in same year for same amount would negate any deduction, but I do not see any indication that this is the case for Iowa.



                From the IRS perspective, the expenses being paid in January and reimbursed in December
                of the same calendar year is not problematic, there may be rules specific to your plan that cause a problem for you.



                The only certain hitch is that contributions aren't available for withdrawal immediately, you'd need a minimum of 7 business days:




                If you make a contribution by check, recurring contribution or
                electronic bank transfer, the money will be available for withdrawal
                after 7 business days.







                share|improve this answer












                Contributions to a 529 plan are not deductible at the federal level, the tax advantage is that earnings in a 529 are not taxed if used for qualified education expenses. So, there would be no point in contributing and withdrawing immediately unless your state happens to have a 529 deduction.



                Iowa happens to be a state that does have a 529 plan deduction, if you are enrolled in one of Iowa's plans:




                Iowa taxpayers who are Participants can deduct up to $3,319 for 2018
                (adjusted annually for inflation) of their contributions per
                Beneficiary, including rollovers, in determining their adjusted gross
                income for Iowa income tax purposes. This deduction applies to each
                Beneficiary account they own and contribute to. For example, married
                Participants who contribute to separate accounts on behalf of their
                two children can deduct up to $13,276 (4 x $3,319) in 2018. **




                I've read that some state deductions are based on the net, so a contribution and withdrawal in same year for same amount would negate any deduction, but I do not see any indication that this is the case for Iowa.



                From the IRS perspective, the expenses being paid in January and reimbursed in December
                of the same calendar year is not problematic, there may be rules specific to your plan that cause a problem for you.



                The only certain hitch is that contributions aren't available for withdrawal immediately, you'd need a minimum of 7 business days:




                If you make a contribution by check, recurring contribution or
                electronic bank transfer, the money will be available for withdrawal
                after 7 business days.








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                answered 3 hours ago









                Hart CO

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