When you withdraw money from your 529 account for “qualified” education-related expenses at an eligible educational institution, you will not have to pay federal or state income taxes. Eligible educational institutions include any accredited higher educational institution, anywhere in the United States, such as public or private colleges or universities, graduate schools, community colleges, vocational schools and technical colleges, or any K-12 institutions.
- Mandatory fees
- Required books, supplies and equipment
- Qualified room and board expenses
A qualified 529 withdrawal may be made payable to the account owner, beneficiary or an eligible educational institution. Learning Quest also may make qualified withdrawals payable to certain third parties such as a sorority, fraternity and certain paying agents designated by an educational institution.
Learning Quest lets you make systematic 529 withdrawals from your account if you have ongoing payments to make for a qualified education expense.
You can set up systematic 529 withdrawals using the Account Features Form or do so online:
- Log in to your account with your user name and password.
- Select "View details" under the selected beneficiary.
- Select "Manage systematic withdrawals."
- Select "Set up a systematic withdrawal plan."
- Enter the frequency, start date, stop date and withdrawal day.
A non-qualified withdrawal consists of proceeds that you remove from the account that do not meet the requirements of a qualified withdrawal. The earnings portion of the non-qualified withdrawal is subject to federal and state income taxes and will be subject to a 10% federal penalty tax. Kansas taxpayers may also owe Kansas state taxes on the contribution.
The availability of tax or other state benefits (such as financial aid, scholarship funds and protection from creditors) may be conditioned on meeting certain requirements, such as residency, purpose for or timing of distributions, or other factors.
IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.
NOTE: It is the responsibility of the account owner and/or beneficiary to determine that the 529 withdrawal meets the requirements to be considered a qualified withdrawal. The January after you make a 529 withdrawal, you or the beneficiary will receive IRS Form 1099-Q. This form reports withdrawal information to the recipient and the IRS.
The availability of tax or other benefits may be conditioned on meeting certain requirements, such as residency, purpose for or timing of distributions, or other factors.
The earnings portion of non-qualified withdrawals is subject to federal and state income taxes and a 10% federal penalty.
This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.