529 distribution in 2025 but tuition paid in January 2026

I strongly encourage clients with 529 plans to match the distribution year with the tuition payment year.  In cases where they didn't listen I've relied upon an old advance notice of proposed rulemaking from 2008 and disclosed that position.

https://www.federalregister.gov/documents/2008/01/18/E8-859/guidance-on-qualified-tuition-programs-under-section-529

Near the bottom in III(B):

Section 529 is silent regarding whether distributions must be made from a section 529 account in the same tax year as QHEEs were paid or incurred. Concerns have been raised that individuals could allow the account to grow indefinitely on a tax-deferred basis before requesting reimbursement or use distributions in earlier years to pay QHEEs in later years. Accordingly, the IRS and the Treasury Department propose to adopt a rule that, in order for earnings to be excluded from income, any distribution from a section 529 account during a calendar year must be used to pay QHEEs during the same calendar year or by March 31 of the following year.

AFAIK, nothing more came of this and regs were never actually issued but this at least gives us an idea of what the IRS was thinking (albeit nearly 20 years ago . . .)

Rick

Agree with prior reply. This is a very common problem, Many colleges bill spring semester in December and require payment prior to Jan 1st. So in the 1st year we have 2 semester billings but only 1 semester 1098-T. Then in the last year (assuming they graduate May, they have tuition but no 529. That's why the qualified educaiton expenses include the extra couple of months as stated in the other reply.

You'll have to force the tuition amount in the Student Education Worksheet to include the spring tuition otherwise you'll incur taxable 529 distributions. Not the most efficient way for the government to handle this (whoa, did I say government and efficient in the same sentence???).

If you are using all the funds from a 529 distribution for education there is no need to even report the 1099Q