Dual enrollment and 529 plans

[Donna]

Has anyone used their 529 plan to help pay for dual enrollment college expenses while their child is in high school? Were there any issues with the IRS about using the interest tax-free?

[historically accurate]

Grandparent owns a 529 for my children. We used the 529 this semester after the 529 firm assured us it is ok as long as it is for post-12th grade classes, even if child is under 12th grade. I haven't paid taxes for this year yet, so I am hoping that they were correct.

[GoodGrief]

Yes, we did back in 2012. My daughter did a program called "Early Honors" during her senior year at a local private college, and we covered the cost with the 529.

Edited September 18, 2017 by Gr8lander

[Donna]

Thank you for the responses.

 

Searches online say it is okay but when I called the 529 company, the guy said it was questionable whether or not there would be an issue.

[Lori D.]

From IRS Publication 970, chapter 6 seems to indicate that yes, a dual-enrolled student is eligible for the tuition deduction:

 

For purposes of the tuition and fees deduction, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution

 

But later on in that same publication, chapter 8 seems that, at least to take the American Opportunity Credit, the student must be enrolled at least half-time and working toward a defined course of study at the college:

 

Half-time student.   A student is enrolled “at least half-time†if he or she is enrolled for at least half the full-time academic workload for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled.

 

 

Your 529 Questions Answered says that while the IRS is explicit about what 529 monies can be used for (qualified educational deductions), it is not clear about who is an eligible student -- which opens the door for using the funds for dual enrollment of high school students.

 

We ended up paying for the much lower dual enrollment tuition costs out of pocket and saved the 529 money to earn interest for a few more years and used it for helping with the very high costs of the 4-year university. YMMV. :)

Edited September 19, 2017 by Lori D.

[teachermom2834]

We have used the 529 for de. At the time I researched it I guess I was convinced it was okay. We also claimed the tuition and fees deduction for the de student while claiming the American Opportunity Credit for our four year full time university student.

 

We used tax software that walked us through it and it seemed to be appropriate.