After years of putting money in your 529 college savings plan, you’re ready to start taking withdrawals to pay tuition bills. Do you know the rules for keeping the withdrawals tax-free?
Here’s an overview of three types of 529 plan distributions.
Qualified withdrawals – These are generally for tuition, fees, books supplies and equipment. These are generally tax free but adjusted for any tax free assistance and must be coordinated with any tax credits received.
Nonqualified Withdrawals – These are for everything else that are not qualified education expenses. These withdrawals are taxable and subject to the 10% penalty unless an exception applies.
Rollovers – You can deposit or rollover withdrawals into the 529 plan of a family member, or into another account of which you are the beneficiary. When the rollover is completed within 60 days after you take the initial distribution, it’s not taxable.
Please feel free to contact the office if you have any questions regarding plan withdrawals.
Tags: 529 plans
Written by: Doug Rodrigues