How do I withdraw money from a 529 Account?

December 8, 2021 –  Here is a step-by-step outline of how to determine the amount of tax-free 529 plan savings that can be withdrawn: 

1. Only “qualified education expenses“ can be withdrawn tax-free.
2. First, add up college expenses, including tuition, fees, books, supplies and equipment, and room and board if the student is enrolled on at least a half-time basis. You can also add K-12 tuition and fees, up to $10,000 per year.
3. Then subtract any tax-free educational assistance, including tax-free scholarships, employer programs, veteran’s benefits, and any expenses used to justify educational tax credits (American Opportunity Tax Credit and Lifetime Learning Credit).
4. Make sure you withdraw the funds within the same period that you paid the qualified expenses. For example, do not include the second-semester tuition paid in the previous December.
5. Where possible, have the 529 withdrawal made payable directly to the beneficiary or the beneficiary’s college or K-12 school.

Please get in touch with us with any questions, and feel free to pass along this information to family or friends who may be interested.