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529 Plans: Taking Distributions

Vertex Planning Partners / Planning / September 12, 2019

Parents looking to take advantage of the many benefits of a 529 plan will want to know the full details on which educational expenses qualify for tax-free distribution status — and which do not.1 In Publication 970, the IRS gives detailed guidance on qualified expenses. Here are a few important points.

(K-12). Keep in mind that taxes and a possible 10% additional federal tax will apply to all distributions that are not considered qualified educational expenses by the IRS, so be sure to check first.

What’s Covered

What’s Not Covered

Note that expenses must apply to a qualified institution college, university, or vocational school. Also note that, starting in 2018, you can also use up to $10,000 in a 529 plan to pay for elementary and high school costs

Source/Disclaimer:

1By investing in a 529 plan outside of the state in which you pay taxes, you may lose the tax benefits offered by that state’s plan. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary.

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