COLLEGE SAVINGS 101

Top 529 Plan Withdrawal Tips. (Script)

03/30/2017

QUESTION:
Top 529 Plan Withdrawal Tips

ANSWER:
#1 How much to withdraw


  • 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, donít 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


    • Checks,

    • 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.

  • But,


    • the earnings portion of the withdrawal is subject to income tax.




View video

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