![]() The earnings portion of a non-qualified withdrawal will be subject to income tax and a 10% penalty. If you made non-qualified purchases last year, you will need to review your 1099-Q, which breaks out the basis portion and the earning portion. In rare cases, these expenses are considered qualified only if the college charges them as part of a comprehensive tuition fee, or the fee is identified as a fee that is “required for enrollment or attendance” at the college. Qualified distributions for student loan repayments have a lifetime limit of $10,000 per beneficiary and each of their siblings.ĥ29 withdrawals spent on other purchases, such as transportation costs or health insurance coverage are generally considered non-qualified. The SECURE Act of 2019 expanded the definition of qualified 529 plan expenses to include costs of apprenticeship programs and student loan repayments. This amount is limited to $10,000 per year, per beneficiary. ![]() Families can also take a tax-free distribution to pay for tuition expenses at private, public and parochial elementary and high schools. 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. However, 529 funds spent on purchases that do not fall into one of these two categories will be considered taxable withdrawals.Ģ. If the funds were spent on qualified education expenses or rolled into another 529 plan you don’t have to report anything. Perhaps you took a distribution last year and received a Form 1099-Q from the plan – does this mean you have to report the earnings? It depends on what the withdrawal was used to pay for. 529 plans save taxpayers billions of dollars on their income taxes. What’s more, the investment earnings in your account are not reportable until the year they are withdrawn. Unlike an IRA, contributions to a 529 plan are not deductible and therefore do not have to be reported on federal income tax returns. If you’ve simply been contributing to an existing 529 account you may not have to report anything on your federal income tax return. Here are some things you might need to do this tax season if your family has a college savings plan: 1. While 529 plans are relatively low-maintenance savings vehicles, there are times when account activity will need to be included on your tax return. But what about your 529 plan contributions? Do your college savings need to be reported to the IRS? ![]() When you dig out last year’s tax return filing, you’re relieved to see that almost everything looks the same this year. Tax season is well under way, and many of us have been spending the past few weeks getting our financial records in order. ![]()
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