You’ve been saving for your child’s college expenses since she was just a baby. You’ve carefully budgeted and run the numbers for how much college will cost. Now, the time has come to spend some of the money.

There are three main ways you can distribute 529 funds:

1. You can distribute directly from the 529 plan to the institution.
2. You can distribute from the 529 plan to the designated beneficiary.
3. You can distribute from the 529 plan to yourself, the account owner.

In this series, I will be demonstrating how you can make these distributions from a College America 529 plan. In our article “Q&A: Who Pays Taxes and Penalties on 529 Distributions and How?,” you can read about the differences between how each of these distributions are reported to the IRS.

What expenses can you pay for this way?

Any qualified education expense for the benefit of the designated beneficiary which is paid to an eligible educational institution can be paid from the 529 plan directly.

Qualified education expenses include tuition and fees; books, supplies, and equipment; expenses for special needs services as required by a special needs beneficiary; expenses for room and board, so long as the student is enrolled at least half-time; the purchase of a computer, peripheral equipment, software, internet access, and “related services;” and lower education tuition. For the most accurate list, you can review the qualified tuition program (QTP) section of IRS Publication 970.

The most common expenses paid directly to the eligible educational institution are tuition, dormitory expenses (room), and dining plans (board).

What information do you need to have on hand?

To request a check be sent to the school, you’ll need:

• The school’s name
• The school’s billing address (which could be different from the school’s physical address)
• Beneficiary’s student ID number (you can get this information from the beneficiary; it is often on the bill they have received)
• The amount you want distributed to the school
• (If you have more than one 529 plan for the same beneficiary) From which 529 plan you will source the funds?

How do you make the distribution?

Upon your distribution request, the 529 plan custodian will sell sufficient investments to generate the cash and mail a check directly to the school’s provided billing address. Because this process relies on the U.S. postal mail, account owners should start the process with enough time before the bill’s due date for the check to be mailed.

Distributions payable to the school can be requested in one of two ways. You can either call American Funds directly to request the distribution or you can use their online portal to place the necessary trades and request the distribution. Calling them on the phone is almost always easier for clients.

To accomplish this, the account owner can call College America directly at (800) 421-4225. The College America representative will verify your identity and ask you for the information described above.

The only tricky question they will ask is “How do you want the funds to be generated?”

The answer “proportionally from all funds” always works. This will keep the current asset allocation of your account the same while still generating the cash for your withdrawal. And yet, you do not even need to remember what funds are currently held in the account.

What do you need to keep for your records?

Distributions paid directly to an eligible educational institution are reported under the beneficiary’s tax identifier, so you will not need to produce records of qualified educational expenses for your own tax return.

That being said, the designated beneficiary should keep a copy of the eligible educational institution’s bill with a copy of that year’s 1099-Q in case of an IRS audit. This is easiest done electronically with scans as receipts tend to fade in a matter of months and you will need to save these records essentially forever.

Photo of Stanford’s Quad by Megan Russell. Image has been cropped.