How do I withdraw 529 savings funds?

CollegeBacker

If you have had your 529 account for over 90 days then you can take a withdrawal. In your college fund settings (top right corner), select “529 plan information” and you will see the "initiate a withdrawal at the bottom of the page." You can choose to transfer the funds to your bank account, the beneficiary, or to the school. You'll receive an IRS Form 1099-Q at the end of the year, which will break out the basis portion and the earning portion of your withdrawal. If the funds are used towards qualified expenses, you will have no tax-penalties.

However, if you choose to withdraw funds for non-qualified expenses (what are qualified expenses), the earnings portion of the investment will be subject to income tax like regular investments and a 10% penalty. Your personal contributions and contributions from your backers will never be penalized or taxed, as the penalty and taxes are only applied to investment gains. You can choose to transfer the funds to your bank account, the beneficiary, or to the school.

 

Note: You can transfer the funds in your account to another beneficiary who is a member of the your family with no tax consequences or penalties.


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