Top 529 Plan Withdrawal Tips. (Script)



Top 529 Plan Withdrawal Tips


#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, 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

    • 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.

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