S. 529 Withdrawals. Be aware of the basic 529 withdrawal penalties when you. As long as you redeposit the money into the same retirement account or another. Vanguard 529 Power of Attorney. Hi, I've saved up some funds in my 529 plan, and my child attends a private grade school. 5 / 5. Be sure to make a copy for yourself and include the following: The name of the school, as well as the date, and the amount that was refunded. Here are six mistakes you'll want to avoid: 1. Helpful. Report Inappropriate Content. Complete and mail the Withdrawal Request Form. Using 529 Plan Withdrawals for Private Education. Generally, if you are age 73, you've reached the age where the IRS mandates you. And—before you request that withdrawal—here are some tips to help you avoid some. ↩. The last thing you want to do after years of saving to pay for college is facing a bunch of tax penalties. A max of $35,000 can be rolled over from a 529 plan to a beneficiary’s Roth IRA. In most states, you should contribute to your 529 college savings plan by the end of the year—i. If the. Taking money out of your 529 plan account won't be difficult. With the new form, the amount of a student’s “total income”, which includes untaxed income, will come directly. com. Fifth Third establishes the rates as well as the effective dates and times. The lifetime cap for funds moved from a 529 plan to a Roth IRA is $35,000 per beneficiary. A 529 plan is an education savings plan sponsored by a state and can be used for education expenses. It’s a myth that you’ll lose your 529 plan if the child wins a scholarship. Mail the form to the address below. If you use 529 funds to pay a college and then receive a refund, you normally have 60 days to redeposit those funds into your 529. IR-2020-124, June 19, 2020. But, room and board (board even if the student lives at home) are qualified expenses for a 529 withdrawal. Under 529 plan withdrawal rules, the following are considered. Bookmark Icon. Funds may be used at virtually any college or university in the United States, and many abroad. qualified withdrawals from an ESA are not counted as income in calculating a student’s financial aid. A 529 savings plan is a way to save for college that offers tax and financial benefits. You should consult with a tax or legal advisor. Systematic Withdrawal Form (Non-Retirement Accounts) PDF. If you’re using 529 plan funds to pay student loan debt, there is a lifetime withdrawal limit of $10,000. I was not paying close enough…For example, Michigan residents who contribute to a Michigan 529 plan owned by another person may deduct up to $5,000 ($10,000 if married) of 529 plan contributions from state taxable income. You can instruct my529 to mail a check to you, your beneficiary, the school where your beneficiary is enrolled, to another 529 college savings plan, or to an ABLE account. Step 1: Calculate how much you are spending on qualified education expenses. Boost your college fund with cash back into your 529 College Savings Plan. The majority of plans offer two options – you can make an ACH deposit to your bank account, or have a check printed and mailed. For 2023, the tax-free contribution limit for each individual is $17,000 per beneficiary. If you need more room for information, make a copy of the relevant page. Return must be filed January 5 – February 28, 2018 at participating offices to qualify. Footnotes 1 Withdrawals for tuition expenses at a public, private or religious elementary, middle, or high school, registered apprenticeship programs, and student loans can be withdrawn free from. The 529 plan must be at least 15 years old and rollover funds will still be subject to Roth annual contribution limits, which for 2023 is $6,500. Yes. 529 prepaid tuition plans vs. If you choose to transfer your money electronically to another account, such as a checking or savings account, your withdrawal should process within 1 to 3 business days if you submit your request by 4 p. S. Rollovers of 529 plan assets into ABLE plan accounts will not be considered taxable events for purposes of New York State taxes. For Illinois taxpayers contributions to Bright Start are tax deductible. Basically, you put after-tax money into it, then it grows tax-free, and if spent on legitimate college (or med school) expenses, it comes out of the account tax-free. How Much Can I. 529 contributions are tax deductible on the state level in some states. 116-136). On the downside, you cannot repay that money, so you will be reducing your retirement nest egg. Keep in mind, however, that a 529 plan beneficiary is only allowed one tax-free rollover in a 12-month period. For 529 funds those can be used to pay for the qualified education expenses of tuition, books, and lab. Download Payroll direct deposit recontributed to your 529 College Savings Plan account will not be included in gross income for federal tax purposes; however, the original distribution will still be reported on your 1099-Q tax form. There are, however, some exceptions that allow. As the account. If you're a New York State taxpayer, you can also benefit from the state tax deduction. Montana - Montana offers the Achieve Montana 529 Plan. 84-119 Month CD (7 to 10 years) 1. All 529 plan withdrawals must be taken in the same year the qualified expenses have been incurred. Kantrowitz said, “provides families with greater. Can I open a Colorado 529 plan today, put $10K in it, with a short-term investment portfolio (I could even go 100% Money Market) and: get the CO tax deduction on 2020 taxes from contributing to a 529 in 2020 (I think yes) withdraw $5K in February 2021 to pay the Spring tuition (definitely yes)Here are seven ways to put a 529 plan to use: 1. There are some guidelines including: 1) The refunded amount must re-deposited within 60 days of the issuance of the refund; and 2) it must be deposited into a qualified 529 account. January 2023. 1099-Q tax forms will be mailed at the end of January and will also be posted on the Bright Start account portal at that time. That means a grandparent-owned 529 plan will not have any impact on need-based financial aid eligibility. However, you can use money in a 529 savings plan to pay for certain student loan expenses for the beneficiary and each of their siblings (up to $10,000 lifetime maximum). These moves can save you money and avoid costly penalties. You don’t lose all or even most of your savings. Tuition and associated expenses, books, fees. The NC 529 Plan is a tax-advantaged saving and investment program that allows users to prepare for education expenses including college expenses and K-12 tuition. If you put $1000 in your 529 account, then immediately use it to pay your loan, you don't get any benefit. I was past the 60 days to redeposit when I first read about this in Kiplinger magazine, and my daughter already deposited the funds. Now college is closer and it's time to think about spending the money you've put aside. Making smart withdrawals from 529 college savings plans can be a lot harder than putting money into them. Once you’ve decided on where to send your 529 funds, the next step is to select the type of payment. Non-qualified withdrawals may also be subject to an additional 2. Make sure to include the account number. New Hampshire - New Hampshire offers the UNIQUE College Investing Plan. Fidelity (where we have the 529 account) recommended that we have the college keep the credit. Before sending a completed form to American Funds, make sure it has all the. Qualified education expenses include tuition, fees, books, computers and related technology and some room and board costs for students attending an eligible college or university. Those who received refunds after May 15 th have 60 days from the date of the refund. Special notice to non-U. Most plans can send checks or electronic payments to you, your beneficiary or the school you’re funding. Your withdrawal will take 2–4 business days from the time of your withdrawal request until the money is available in the account you are transferring to because the investments must be sold and the trade must settle. Now this year, Accidentally withdrew $747. How Our 529 Works. Say your child receives a full or partial scholarship or attends a military academy, you can withdraw certain amounts from your 529 account that will not be used for qualified higher. . For this and other information on any 529 college savings plan managed by Fidelity, contact Fidelity for a free Fact Kit, or view one online. Answer: Generally, if you withdraw money from a 529 for anything other than eligible college expenses, the earnings portion of each withdrawal will be subject to income taxes and a 10% early. K-12 tuition withdrawals beyond $10,000, or withdrawals used for non-qualifying expenses, are subject to income tax and a 10% penalty. Say your child receives a full or partial scholarship or attends a military academy, you can withdraw certain amounts from your 529 account that will not be used for qualified higher. To process a request online: Log on to your account. For withdrawals made payable to the account owner, the 1099-Q is sent to the account owner. Please note: This website includes an accessibility system. So, you usually don't have to use all your tuition for the 529. That includes tuition, fees, books, supplies, and. However, if the withdrawal is a result of a scholarship being received, the penalty will not be applied. Open a 529: 529 Enrollment Application. Report any taxable 529 plan withdrawals. a 529 plan. For instance, withdrawals from 529 plans were 100% free of federal taxes if they were used to cover qualified education expenses such as tuition and fees, or room and board. 5% state income tax penalty on those earnings. Contributions made to the 529 plan in the last five years before distributions start—including the associated earnings—are ineligible for a tax-free rollover. To make a transfer of a Coverdell ESA to a 529 savings plan you would follow these steps: Request a withdrawal from the Coverdell ESA. . Fair enough. You must make 529 plan distributions during the same tax year that you incur the qualified higher education expenses. -Funds from a non-529 source are transferred to the student’s checking account to cover non-qualified expenses. This. e. To process a request online: Log on to your account. My daughters received the refunds and deposited them, and my plan was to do the same- reduce the 529 withdrawal in 2020 by the amount of the refund. 2. Miscellaneous itemized deductions are those deductions that would have been subject to the 2%-of-adjusted-gross-income (AGI) limitation. Topic No. SPONSOR CENTER. 529 Withdrawals Penalties. If great than $10,000, you will need to cash the refund check, and then send OTTA a personal check for the re-contribution. Withdrawals from a 529 plan account; Take advantage of professional money management experience from Fidelity. The program helps Ohio families and individuals save for future education expenses tax-free. You can give it to someone else. Designating the distributee. Just about anybody can open a 529 account—parents, grandparents, other relatives, friends—as long as he or she is a U. Withdrawals from a 529 plan account can be taken at any time, for any reason. A 529 can be a huge asset for a family with a college student, but misusing account funds will negate some of its benefits. In Washington state, for example, the 529 withdrawal penalty for non-qualified distributions includes earnings on 529 funds being taxable at the federal and state level, plus the 10% federal. An annual withdrawal limit of $10,000 is applied to 529 plans for K-12 tuition expenses. 2 If the funds aren’t used for qualified higher education expenses, a 10% penalty tax on earnings (as well as federal and state income taxes) may apply. The Benefits Of 529 Plans For Retirees. Technology Items – You can use a 529 plan to cover technological needs such as computers, printers, laptops and even internet service. In some cases, this tax is increased to 25%. If you contribute money to a qualified tuition program, such as a 529 plan or a Coverdell ESA, you will likely receive an IRS Form 1099-Q in each year you make withdrawals to pay school expenses of the beneficiary. Your ScholarShare 529 funds can be used at any accredited university in the country—and even some abroad. As long as your qualified education expenses are greater than or equal to the amount withdrawn from the 529, you don't have to report anything about the withdrawal on your tax return. Contribute online at myfloridaprepaid. 529 . You can save for your child, another family member, or even for yourself. There are certain life situations that enable an account holder to avoid the 10% tax penalty. Treat the Coverdell withdrawal as a tax-free "qualified distribution" on the beneficiary's income tax return. Nestled in the $1. Here are the steps to follow: Direct 529 Plan Re-contribution You must mail in a check as the re-contribution. 529 savings plans : Withdraw from Your 529: Vanguard 529 Withdrawal Request Kit. Tax professionals and other experts agree that 529 plan distributions should match qualified. 529 plans are tax-advantaged college savings accounts sponsored by each state. Out of the $4,000 credit, I can keep $2,000 in books and iPad that I bought her for college, which I didn’t withdraw from the 529 account yet. You can use funds from a 529 account for a wide range of qualified education-related expenses. An annual withdrawal limit of $10,000 is applied to 529 plans for K-12 tuition expenses. But, if the money is not used for qualified education expenses, federal income taxes may be due on any earnings withdrawn. Non-qualified withdrawals will incur a 10 percent penalty on the earnings portion of that non-qualified withdrawal and should be reported as income by the 1099-Q. Ronda Lee. The 2023 limit is $17,000 per recipient, and 529 college savings plans allow you to. As mentioned above, if you take a distribution from a 529 plan and use some or all of it to cover non-qualified expenses, you will owe not just federal income tax but, in most cases, an. Include Schedule OR-529 with your Oregon personal income tax return. Unfortunately, the college automatically refunded the credit directly to my daughter’s checking account. Or you can mail the Plan a completed Withdrawal. • Type in the information and print out the completed form, or print clearly, preferably in capital letters and black ink. For example, suppose your qualified education expenses are $10,000, you receive a $2,000 Pell grant and boxes 1 and 2 of your 1099-Q report a gross distribution of $8,000 and earnings of $1,000. 2228 from 7:30 AM to 6:00 PM, Central, Monday through Friday). Invests primarily in well-established companies with strong balance sheets and a history of consistently paying dividends, helping to provide downside resilience. ” This will avoid taxes. You have two options for each form. Follow the 529 withdrawal rules scrupulously. Starting January 1, 2018, this definition is expanded to include up to $10,000 in K-12 tuition expenses per beneficiary per year. California even imposes an additional 2. The first restriction on a standard rollover is you only have 60 days after the distribution to redeposit funds into an IRA account, hence the moniker “60-day rollover. CollegeAdvantage, Ohio's 529 Plan, is a simple and flexible way to save for whatever school comes after high school. If you put $1000 in an index fund and wait a year, you could end up with (say) $1050, and that extra $50 is non-taxed. Most 529 plans include an administrative or annual fee, which tends to be around 0. Made the $747 contribution I originally planned. View All Our Family of ETFs. • Non-qualified withdrawals will incur a 10 percent penalty on the earnings portion of that non-qualified withdrawal and should be reported as income by the 1099-Q recipient. However, make sure to use your withdrawals. Basically, you put after-tax money into it, then it grows tax-free, and if spent on legitimate college (or med school) expenses, it comes out of the account tax-free. Learn more about 529 plans with answers to frequently asked questions about tax-advantaged savings plans designed to save for college. Withdrawals for student loan repayments and apprenticeships can go to the account owner or beneficiary. citizen or a resident alien. Any redeposit beyond that time frame counts as an unqualified withdrawal and triggers potential tax consequences. If you really think there is no chance you or anyone else in your family will ever use the funds in the 529 plan for education-related purposes, then go ahead and take a nonqualified distribution. When 529 plan funds are used to pay for qualified education expenses there is usually nothing to report on your federal income tax return. m. But in. If you're able to redeposit the money or roll it into a new account during the 60-day safety window, you'll need to replace. 529 Plans and Your Tax Return. Invest529, Virginia's direct-sold college savings plan is available to residents of any state, and offers low fees, diverse investment options and tax benefits for residents. The Coronavirus Aid, Relief, and Economic Security (CARES) Act became law on March 27, 2020 (Public Law No. Below are all the forms you should need to create and manage your NC 529 Account. R. View All 1GT: Climate Investing Reinvented. For the 13th consecutive year, my529 has been named one of the country’s premier 529 educational savings plans by Morningstar, a leading industry analyst. The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. If you withdraw money from your 401 (k) before you’re 59 ½, the IRS usually assesses a 10% tax as an early distribution penalty. Or you can mail the Plan a completed Withdrawal. After putting money in a 529 plan, you can withdraw money to pay for college. Exceptions to 529 withdrawal penalties. Yes – Moved the money to another retirement account (or returned it to the same retirement account). 6 tips for making qualified withdrawals from your 529. The first $17,000 of gifts to each beneficiary during 2023 (or $34,000 for a married couple filing jointly) is excluded from gift taxation. 529 College Savings Plan Withdrawal Request Form Download: 529 MoneyLink Form Download: 529 Learning Quest College Savings Maintenance Forms: Learning Quest 529 Plan Account Features Form. Rollovers are. Follow the 529 withdrawal rules scrupulously. The Protecting Americans from Tax Hikes (PATH) Act allows you to recontribute those funds to your Ohio Direct 529 account. You can estimate the approximate cost by logging in to myCalPERS to get an estimate. This includes public and private colleges and universities, apprenticeships, community colleges, graduate schools and professional schools. Use the following steps to figure the taxable part. Or you can mail us a a completed Withdrawal Request Form. To be safe, limit your 529-plan withdrawals to your beneficiary’s total qualified higher education expenses less. I have put $747/year in the specific account for each year 2017-2020. An individual can put up to $17,000 in there in 2023, up from $16,000 in 2022 ($34,000 for married. - All scholarships, grants and 529 funds are claimed as taxable income *initially* in the tax year they are received. You can also request a withdrawal to your address or bank account on file using our voice response system. Investment objectives, risks, charges, expenses, and other important information are included in the Plan Description. An acknowledgement that you’re making a 529 recontribution following the IRS’s guidance ( Notice 2020-23 ). Three flexible, affordable, tax-advantaged programs– Prepaid529, Invest529 and CollegeAmerica®, along with early commitment. Your 529 savings plan withdrawals will be free from federal tax as long as they’re used for QEEs, such as room and board, tuition, required books and supplies for higher education. you must redeposit the refund into a 529 account. The updated FAFSA does not require students to manually report cash support. If the beneficiary attends an eligible educational institution at least half-time, you can still use the 529 account to pay for certain room and board expenses. $1,470. 120-144 Month CD (10 to 12 years) 1. If you do not have enough qualified expenses, then yes, you need to redeposit the 529 money. 529 withdrawals are tax-free to the extent your child (or other account beneficiary) incurs qualified education expenses (QHEE) during. Enrollment fees: Includes student activity fees you are required to pay to enroll or attend the school. Online. You would complete the Model Letter in the appendix to Revenue Procedure 2016-47 PDF or a substantially similar letter and present it to the financial institution receiving the late rollover contribution. The maximum annual Roth IRA contribution limits still apply—while the 2024 numbers aren’t out yet. Pay The Taxes But Avoid The Penalty. A primary focus of CSF is building public awareness of and providing public policy support for 529 plans – an increasingly vital college-savings vehicle. As explained earlier, the earnings included in 529 account withdrawals that are not used to cover the account beneficiary’s qualified education expenses must be included in gross income. as Program Manager. To process a request online, log on to your account, choose Go to my 529 plan account, and then select Withdrawal. In rare circumstances, there may be other instances in which a non-qualified withdrawal is permitted. Ashbridge Strategy. The amount of your service credit redeposit will be the cost of your withdrawal plus interest, compounded annually through the end of the current pay period. Request a withdrawal from your Invest529 and/or CollegeWealth account. You enter data derived from the 1099-Q in your tax return. Tax-Free 529 Withdrawals — No income tax is paid on the growth of your account when withdrawals are used for 529 qualified expenses. Ohio’s 529 Plan, CollegeAdvantage, like other 529 accounts, benefits from specific tax advantages, including tax-free withdrawals for qualified higher education expenses. Contributions may trigger gift tax consequences if you earmark more. 529 withdrawal penalties for non-qualified distributions. Changes to qualified withdrawals from Oregon 529 Col-lege Savings Network accounts. Fee Score. So, if you wanted to roll over the entire $35,000 lifetime limit amount, you. If TurboTax is using the education expenses for either of these credits and is treating a portion of the 529 distribution as taxable as a result, even though the 10% additional-tax column shows an. If you use a 529 plan to save for college, your savings will have a minimal impact on. When you pay qualified education expenses from a 529 account, your withdrawals are tax- and penalty-free. For more information about Wisconsin's Edvest 529 College Savings Plan, call 1-888-338-3789 or click here for a Plan Description which includes investment objectives, risks. Update account features, apply for trading services, and set preferences, such as online delivery. 3,4 Plus, Ohio taxpayers can deduct their contributions to a CollegeAdvantage Direct 529 Plan from their state income taxes up to $4,000 per beneficiary, per year, with unlimited carry forward. Fee Score. Match your 529 plan withdrawal to qualified education expenses. Funds may be used at virtually any college or university in the United States, and many abroad. The 10% additional tax also does not apply as a result of withdrawals made due to the death or disability of the designated beneficiary. These include items such as tuition and fees, room and board, textbooks and lab. Just about anybody can open a 529 account — parents, grandparents, other relatives, friends — as long as he or she is a U. AQEE equals the sum of the 529 account beneficiary’s. This investment account allows you to grow the account tax-free and withdraw funds tax-free when used for qualified education expenses. An account owner may initiate a tax-free distribution on behalf of the beneficiary for “qualified” college or graduate school expenses (in most states). Taxable Withdrawals: The earnings portion of this type of withdrawal is subject to federal and state tax but does not include the additional federal 10% tax. This scenario may appear that. 3,4 Most importantly, you can use your 529 funds at most post-secondary schools nationwide. For example, if you lose your job but expect to be working again soon, you can take a withdrawal and then redeposit up to $14,000 in one year without incurring a. Laura Saunders. The Pension Protection Act of 2006 indefinitely extended the federal tax-free qualified withdrawals on 529 college savings plan savings. 5% California tax on earnings. Planning LIFE MOMENTS. If you withdraw money from your 529 plan for a non-qualified purpose, the withdrawal will be subject to tax, including the additional 10% federal tax. I accidentally took a 529 withdrawal instead of making a contribution on my 1-year old son's 529 account yesterday. That could mean giving the government $1,000, or 10% of a. How a 529 Plan Works. In addition, your investment options are limited with a 529 plan, as opposed to a brokerage or Roth individual retirement account (IRA), which gives you complete freedom to buy and sell whichever securities you want. We usually use less than the "allowed" (college cost of attendance R&B amount) room and board. Just log on to your account and request a withdrawal. Cost of Redeposit. 529 plan account owners can. NY 529 Direct Plan account owners benefit from tax-deferred earnings and tax-free withdrawals. Account owners may redeposit funds that were previously withdrawn from Prepaid529 accounts. This. 50%. 313, Qualified Tuition Programs (QTPs) A qualified tuition program (QTP), also referred to as a section 529 plan, is a program established and maintained by a state, or an agency or instrumentality of a state, that allows a contributor either to prepay a beneficiary's qualified higher education expenses at an eligible educational. ET. Those ages 50 and older can contribute an. Though the tax-free earnings on withdrawals used for such tuition expenses. The Path2College 529 Plan is offered by the State of Georgia, with TIAA-CREF Tuition Financing, Inc. As with any investment, a 529 plan will experience market changes that. 4. Account Transfer Form (Non-Retirement) PDF. There are two kinds of 529 accounts: prepaid tuition plans and education savings plans. Mistake #2: Relying on Form 1098-T. We suggest you keep receipts and records to substantiate your qualified expenses in case of an audit by the IRS. For this and other information on any 529 college savings plan managed by Fidelity, contact Fidelity for a free Fact Kit, or view. 1 Wisconsin taxpayers can qualify for a 2023 state tax deduction up to $3,860 annually per beneficiary from contributions made into an Edvest 529 College Savings Plan (married couples filing separately and divorced parents may claim a maximum of $1,930). with 60 day time limit and once per year - can you make two withdrawals, 30 days apart and redeposit both within 60days from the first? The follow-up is the series of questions that TurboTax presents after clicking the Continue button on the page where you enter the details from the Form 1099-R. All states offer 529 plans (except for Wyoming), and there are two types: Savings plans (savings are. Request a full or partial withdrawal from your Vanguard® 529 College Savings Plan. Non-qualified withdrawals will incur a 10 percent penalty on the earnings portion of that non-qualified withdrawal and should be reported as income by the 1099-Q. Under the updated tax code, parents can withdraw up to $10,000 per year to pay for tuition, books, and other eligible expenses at private elementary and high schools. Log on to your account. An HSA is a health savings account. A 529 savings plan is designed for the longer term. , December 31—to maximize any state tax breaks associated with those contributions. Check with a local accountant to see how this may impact your state tax return. The biggest tax benefit of the Section 529 plan is that it allows for tax-deferred accumulation and tax-free withdrawals for qualified expenses. Then the funds are transferred. my529 is one of only two 529 plans nationwide to earn the Morningstar Analyst Rating™ of Gold. Select one of the following: Yes. e. You can take a nonqualified withdrawal. States can set their own limit, however. For withdrawals made payable to the student or a school, the 1099-Q is sent to the student. The majority of plans offer two options – you can make an ACH deposit to your bank account, or have a check printed and mailed. Withdraw Funds Only for Qualified Expenses. The Biggest 529 Withdrawal Mistake To Avoid. SECTION 1 | Account Information Account Owner Name Account Number(s) Phone Number Email Address If the money is put back in with in 60 days, and no other rollovers in 12 months, this may be treated as a rollover with mot taxes or penalty due. Due to 2018 tax reforms, parents can use up to $10,000 saved in 529 accounts to pay tuition for children attending kindergarten through 12 th grade. SECTION 1 | Account Information Account Owner Name Account Number(s) Phone Number Email Address 529 plan deposits are made with after-tax money, so only the earnings portion of non-qualified withdrawals are subject to tax. if you take a $10,000 distribution from a retirement account and have the 20% withheld for taxes you must redeposit $10,000 within 60 days even though you only received $8,000 in cash. Likewise, once a borrower receives $10,000 in. Also, if you access any gains, you are subject to potential fees and taxes. 1. The redeposit cannot exceed the amount of the original payout. You can't just withdraw original contributions. A 529 plan is an investment account that offers tax benefits when used to pay for qualified education expenses for a designated beneficiary. Pros. I have this situation with 2 children and 2 529 plans. Say your child receives a full or partial scholarship or attends a military academy, you can withdraw certain amounts from your 529 account that will not be used for qualified higher. If the beneficiary or account owner of a 529 plan receives a refund of qualified higher education expensesfrom the college or university that were paid for with a 529 plan distribution, the refund can be recontributed to the 529 plan within 60 days of the date of the refund without having to pay any taxes and penalties. Here’s why: 1. Select Make a Withdrawal from the options on the right. There are several scenarios in which you can make non-qualified 529 plan withdrawals and avoid paying the 10% penalty. To avoid certain tax consequences and penalties: • The funds you wish to redeposit must have been refunded by the student’s school and redeposited into a 529 account for that same student. However, if you contribute more money on behalf of the same child. It *does* *not* *matter* what tax year that scholarship, grant or 529 withdrawal is *for*. Include Schedule OR-529 with your Oregon personal income tax return. 5% state income tax penalty on those earnings. 1 If the funds aren't used for qualified higher education expenses, a federal 10% penalty tax on earnings (as well as federal and state income taxes) may apply. And up to $10,000 can be withdrawn from 529 plans tax free to cover tuition at public, private and religious K-12 schools. Taxes will be withheld from a distribution from a retirement plan (see below), so you’ll have to use other funds to roll over the full amount of the distribution. 6 tips for making qualified withdrawals from your 529. Open a 529 account with Merrill today. Health insurance – If you become unemployed and you need to purchase health insurance, you can make a penalty-free early withdrawal. But it can be daunting for a first-time saver (and sleep-deprived parent) to sort through the. This includes expanding the categories of individuals eligible. Do not staple.