Presented by Wesley Botto
You’ve put in the hard work of saving for college, and now it’s time to start using those 529 plan assets to help with a family member’s education-related costs. But before you begin withdrawing those funds, it’s important to understand the difference between qualified and nonqualified expenses.
The charts below provide an overview of some of the most common qualified and nonqualified expenses.
Please note: Just because an expense is nonqualified, it doesn’t mean the 529 plan funds cannot be considered a source of payment. The main consequence of paying nonqualified expenses from the 529 plan is that the gains portion of that distribution will be taxed, and it could be assessed a 10 percent penalty.
For more information on 529 plans (referred to as “Qualified Tuition Programs”), and for examples of tax and coordination calculations, see the Qualified Tuition Programs section of the IRS Publication 970.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.
Wesley Botto is a financial consultant located at Botto Financial, 4565 East Galbraith Road, Suite B, Cincinnati, OH 45236. He offers advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, a Registered Investment Adviser. He can be reached at 513.924.3350 or at email@example.com.
© 2020 Commonwealth Financial Network®