Top 529 Plan Withdrawal Tips. (Script)
Top 529 Plan Withdrawal Tips
- Calculate the maximum amount that will qualify for tax-free treatment:
- Tuition + Room and Board + Books + Computers + Special Needs Equipment= Total Qualified Higher Education Expenses (QHEE)
- Subtract expenses used to generate the American Opportunity Tax Credit or Lifetime Learning Credit
#2 When to withdraw
- Withdraw funds during the same calendar year that the qualified expenses were paid:
- If you take out money in December, don’t wait until January to pay your spring semester tuition.
#3 Who to pay
- Most plans allow you to make the payment to
- the account owner,
- The beneficiary,
- Or the school
- Most plans allow you to pay by
- ACH deposit
- Electronic payment
- Some plans may offer additional options
- Check with your provider!
#4 If you get a scholarship
- The 10% penalty on non-qualified withdrawals is waived up to the amount of the tax-free scholarship.
- the earnings portion of the withdrawal is subject to income tax.