Hi all. I've always been around...just lurking for a while. Some very nice posts here as always. Greetings to everyone!
Right now I am the owner of three 529 accounts for grandchildren. The FAFSA issue has come up, and seems to indicate that the amount of scholarship money available might be reduced far more if the grandparent owns the 529 than if the parent owns it. I swore my brains worked better than this, but it seems like a big muddy mess.
Has anyone deciphered the FAFSA/529 conundrum? TIA
Best, hawk
p.s. I might have posted along these lines a couple years ago. If so apologies for the redundancy
Comments
Similar Take with more details:
https://wsj.com/articles/when-grandparents-and-529-plans-for-college-savings-clash-1408747176
and,
https://money.usnews.com/money/personal-finance/mutual-funds/articles/2015/09/08/grandparents-dont-make-a-529-plan-mistake
It does seem that fed financial aid is impacted less (much less) if a parent owns rather than gparent. No other advantages that I can see except that I will be mercifully divested of 3 accounts to oversee
A more personal question about the 529's. Are there 529's in the name of the parent(s) or only in your name. This is somewhat related to your original question about 529 monies affecting FAFSA. @bee added excellent info/links.
I added a few things below; past your original question.
Regards,
Catch
---Original 529 plan monies uses: the qualified education expenses of the designated beneficiary, such as tuition, fees, books, as well as room and board at an eligible education institution.
---Also, contributions to a 529 do not have to be stopped once the beneficiary starts undergrad school. Post graduate school is eligible, too. A consideration with continuing to add monies is whether all of the money will be used (not hard to use all of the money today, eh?). However, if more money appears to be needed and one has the ability to add to the 529; the distributions from the investments continue to be tax exempt. The 529 remains a tax free investment, yes?
---A few notes (IRS) about new adds to "what" 529 monies may now be used:
Q. Can I make withdrawals from my 529 plan for the costs of computer technology or equipment?
A. A qualified, nontaxable distribution from a 529 plan includes the cost of the purchase of any computer technology, related equipment and/or related services such as Internet access. The technology, equipment or services qualify if they are used by the beneficiary of the plan and the beneficiary's family during any of the years the beneficiary is enrolled at an eligible educational institution.
Q. What does “computer technology or equipment” mean?
A. This means any computer and related peripheral equipment. Related peripheral equipment is defined as any auxiliary machine (whether on-line or off-line) which is designed to be placed under the control of the central processing unit of a computer, such as a printer. This does not include equipment of a kind used primarily for amusement or entertainment. “Computer technology” also includes computer software used for educational purposes.
Q. Is this “cost of the purchase of any computer technology or equipment or Internet access and related services” available for any other education benefit under the tax laws?
A. No, it is only for 529 plan withdrawals. Such costs are generally not qualifying expenses for the American opportunity credit, Hope credit, lifetime learning credit or the tuition and fees deduction.
The computer stuff is interesting...it looks like the IRS knows nobody but nobody goes to school without a machine. How they would know if little Johnny accesses something, cough, cough, 'amusing and entertaining' is beyond me though