I just want to say thank you for your material! Sigh, it took me 3 attempts to finally do it, but I passed! I used a combination of helpful tools and Achievable was one of them! I recall a question on the test and it’s driving me nuts because I don’t know what the right answer was, is there some limit on 529 qualified distributions per calendar year or academic year?
Congrats @Teemoto3, I know it’s been a long journey for you and I’m really happy that you’ve passed!
There are various limits on 529 contributions, but 529 distributions don’t have limits if used for college tuition. Maybe the question you saw was talking about non-college education expenses? The limit for that is $10k anually.
Here’s a snippet from our text:
529 plans are primarily used for college expenses. However, up to $10,000 per year can be used for private, public, or religious school below the college level. If college savings plan funds are not used for education, the account owner is subject to ordinary income taxes and a 10% penalty (only on the gains; the basis is always tax-free) However, if the student receives a scholarship and no longer needs the 529 plan, the assets may be withdrawn without the 10% penalty (ordinary income taxes will still apply to gains).
I don’t recall the exact question but maybe it said what is NOT allowed and there was one answer that said 12K for private school so I knew that was not allowed, but I really thought it said what IS allowed and two other choices were $50K for college spring and fall semesters in the same academic year and one other answer was $60K for college spring and fall semesters for one calendar year. I really thought it was what WAS allowed.
Thanks for the additional context!
Yeah, those negative questions (e.g. false, except) trip me up all the time too.
I like to reword the question mentally in the normal, positive phrasing before trying to answer - it helps make space to focus on the actual question content!
How would you reword it mentally?
Depends on the wording of the question, but something like:
All of the following distributions are not allowed, except:
Is more simply:
Which distribution is allowed?
Hi there! I recently took the Series 7 and got the same 529 question that you mentioned! I bugged me as well and I think they were trying to get us to pick which answer would result in a qualified distribution. The only answer that would result in a qualified distribution was the $60K for college spring and fall semesters for one calendar year. At least this is how I read the question.
Yes @Suzanne thats exactly it!! Ok so do you know why it was that answer vs the $50k one?
It seems the $60,000 for college spring and fall semesters in one calendar year would be the right answer, although it depends on the specific language in the question. Generally speaking, distributions should be taken in the same calendar year the college bill is paid. Here’s a snippet from a good article on this topic:
529 plan distributions must be made during the same tax year that the qualified expenses are incurred. This is not an official IRS rule, but it is implied by published IRS guidance. Tax professionals and other experts agree that 529 plan distributions should match up with qualified expenses.
Families should pay attention to spring semester tuition bills. Spring semester typically begins in January, but colleges might send the bill in December (of the previous tax year). If a family receives a spring semester tuition bill in December, they may take a qualified 529 plan distribution in December to pay the tuition bill. If they wait until January (the next tax year) to pay the tuition, they should wait until January to withdraw funds from their 529 plan.
I’m going to add some additional context to our material to call this concept out. Hope this helps solve it for everyone!
Yes @brandonrith that is the answer and explanation I was looking for, thank you, now it makes sense! I don’t recall seeing this in any of my study material which was multiple vendors.
I just added this snippet to our 529 plans chapter:
Distributions must generally be taken in the same calendar year a college expense is assessed. For example, let’s assume a student is assessed tuition for the Spring and Fall early in the same calendar year. Taking a distribution to pay for both would be compliant with IRS guidelines. However, taking a distribution to pay for the current year’s Fall tuition and the following year’s Spring tuition may create some issues. In particular, paying for Spring tuition of the following year is not taking a distribution for current calendar year costs.
We will also add some new practice questions in our test bank soon!
Great I am sure this will help out others!
@Teemoto3 do you have any tips you could share that helped you passed the Series 7?
@Marisa i will be honest this was my third attempt and I was definitely discouraged but I’m glad people talked me into giving it one more shot! I definitely think it was a culmination of things to help me pass: time with getting familiar with the material, achievable material, capital advantage you tube videos, NOT studying 24/7 ( my 3rd attempt I backed off studying all the time and I think it decreased anxiety).
Hope these suggestions help!
@Teemoto3 Thanks, I really appreciate it!