Can I withdraw from a 529 plan for multiple beneficiaries (both kids) in the same tax year? [IRS]

Thanks so much for the detailed answer! Just to make sure I understand correctly - if I switch the beneficiary to my son in November, I could then withdraw funds for his expenses from the entire year, not just November-December? That would be perfect since his expenses have been higher than we expected. Also, do I need to keep any special documentation to prove when I made the beneficiary changes in case of an audit?

Yes, that's correct. Once you change the beneficiary to your son in November, you can withdraw funds for qualified education expenses he incurred throughout the entire year, not just November-December. The key is that he must be the beneficiary at the time of the withdrawal, not necessarily when the expense occurred. For documentation, I strongly recommend keeping detailed records of when you made beneficiary changes, copies of all qualified expenses for both children, and records of all withdrawals. Note which beneficiary was designated for each withdrawal. While not explicitly required, having this documentation will be invaluable if questions arise or in case of an audit. Many 529 plan administrators keep records of beneficiary changes, but it's always smart to maintain your own files as well.

Does it actually help figure out the timing for beneficiary changes? That's my biggest concern... I have three kids and I'm terrified of messing up the paperwork and getting hit with penalties.

I'm skeptical about these online tax tools. How does it handle the 1099-Q situation? My 529 provider told me they can only issue the form to whoever is the beneficiary at the end of the year, which contradicts what the first commenter said.

Yes, it has a calendar feature that helps you plan the optimal times to make beneficiary changes based on when your expenses are due and when you need to take withdrawals. It basically creates a roadmap so you don't miss any opportunities to maximize qualified expenses across multiple children. The tool specifically addresses the 1099-Q reporting requirements. It works with how your specific 529 plan administrator handles reporting. Some administrators will indeed issue separate 1099-Qs for each beneficiary who received distributions, while others might only report for the year-end beneficiary. The tool helps you document everything properly regardless of how your provider handles it, so you have proper support for your tax return if questions arise.

How does this Claimyr thing actually work? I've tried calling the IRS for months about a similar 529 issue and never get through. Do they just call for you or what?

Sorry, but this sounds too good to be true. I've been told repeatedly that the IRS doesn't have enough staff to answer specialized tax questions like this. How do you know you got correct information and not just some generic response?

They basically hold your place in the IRS phone queue and call you back when an actual agent is on the line. It saved me literally hours of waiting on hold. There's no way I would have gotten through otherwise - I had already tried three times and gave up after 1+ hours each time. When you finally get connected to an IRS agent, you're talking to an actual IRS employee who can access your tax records and provide official guidance. The agent I spoke with specifically handles education-related tax questions and walked me through the whole process for managing multiple beneficiaries. She even emailed me IRS publication references so I would have documentation. It wasn't generic at all - she addressed my specific situation with two kids in different colleges using the same 529 plan.

That's a really good point I hadn't considered. If I'm understanding correctly, if I claim the full $2,500 AOTC for each kid, I need to subtract $2,500 from each of their qualified expenses before calculating how much to withdraw from the 529 plans? Does the timing of when I make these withdrawals affect how this works?

That's exactly right. If you claim the full $2,500 AOTC for each child, you need to reduce each child's qualified education expenses by $2,500 before determining how much to withdraw from their 529 plans as qualified distributions. The timing of withdrawals doesn't affect this calculation directly. What matters is which tax year the expenses and withdrawals occur in. Just make sure that for each tax year, your total qualified 529 withdrawals for each student don't exceed their qualified expenses minus any expenses used to claim education tax credits. This is true regardless of when during the year you make the withdrawals or change beneficiaries.

I'm in New York and went through this last year. Changing beneficiaries doesn't affect the state tax deduction you already received for contributions. That benefit happens when you put money in, not when you take it out or change beneficiaries. The only state-level concern would be if you take non-qualified distributions - those might be subject to state income tax and possibly recapture of previous deductions, depending on your state's rules.

That's such a smart approach with the spreadsheet! I'm new to dealing with 529 plans (my oldest just started her freshman year), and I've been feeling overwhelmed trying to keep track of everything manually. Your point about checking how quickly the plan processes beneficiary changes is really valuable - I hadn't even thought to ask about that. My plan uses paper forms and I was planning to make changes monthly, but if it takes 1-2 weeks each time, that could really mess up my timing for withdrawals. Do you mind sharing what columns you're tracking in your spreadsheet? I want to set something similar up but I'm not sure what details I should be documenting to stay on the safe side for tax purposes.

@Nia Williams Happy to share! My spreadsheet has these columns: Date, Child Name, Expense Type tuition, (room/board, books, etc. ,)Amount, Current 529 Beneficiary, Withdrawal Date, Withdrawal Amount, and Notes. The key is making sure the Current "529 Beneficiary column" matches who was designated when you made each withdrawal, not necessarily who incurred the expense. I also add notes about when I submitted beneficiary change requests and when they were processed. For your plan with paper forms, I d'suggest batching your beneficiary changes - maybe quarterly instead of monthly - and timing them around your biggest expense payments like tuition due dates. That way you re'not constantly waiting for paperwork to process while bills are due. One more tip: I keep copies of all the beneficiary change confirmations from my plan administrator in the same folder as my expense receipts. Makes tax season much easier!

This is exactly the kind of professional insight I was hoping to find! As someone just starting to navigate this process, I really appreciate you mentioning the kiddie tax rules - that's something I hadn't even considered and could definitely apply to my situation since both my kids are still dependents. Your point about different 529 administrators handling 1099-Q reporting differently is particularly helpful. I think I need to call my plan administrator tomorrow to understand exactly how they handle this before I start making any beneficiary changes. Do you have any specific recommendations for what questions I should ask my plan administrator about their reporting procedures? I want to make sure I get all the information I need in one call rather than having to follow up multiple times.