). You enter data derived from the 1099-Q in your tax return. If you contribute money to a qualified tuition program, such as a 529 plan or a Coverdell ESA, you will likely receive an IRS Form 1099-Q in each year you make withdrawals to pay school expenses of the beneficiary. You can give it to someone else. In addition to tuition and fees, you can spend 529 money on books, supplies, living expenses, computers, and other equipment, as well as internet access. ES_NYA_WD_030222 — Page 3 of 8 Reason for withdrawal (continued) G. Some types of home purchases are eligible. Invest529, Virginia's direct-sold college savings plan is available to residents of any state, and offers low fees, diverse investment options and tax benefits for residents. com. An annual withdrawal limit of $10,000 is applied to 529 plans for K-12 tuition expenses. When making a withdrawal from your 529 plan, consider the following: • The withdrawal can be made before you pay for the qualified expenses. It’s complicated. A 529 plan is an education savings plan sponsored by a state and can be used for education expenses. Normally, you can't return the RMD from an inherited account but 2020 is a special case. 3. You can instruct my529 to mail a check to you, your beneficiary, the school where your beneficiary is enrolled, to another 529 college savings plan, or to an ABLE account. You never pay tax on the basis . Making smart withdrawals from 529 college savings plans can be a lot harder than putting money into them. As long as you redeposit the money into the same retirement account or another. I have this situation with 2 children and 2 529 plans. Take the Money – and the Penalties. Know which expenses qualify. Beginning with the 2024. original Withdrawal was taken; 4) the portion of the refund you wish to redeposit must be a refund of Qualified Higher Education Expenses only; and 5) your redeposit amount cannot exceed the amount of the original Withdrawal from your Account. Return must be filed January 5 – February 28, 2018 at participating offices to qualify. Couples filing taxes jointly may contribute a total of $34,000 per year per beneficiary without paying gift tax. Whatever you deduct will be prorated (i. Request a direct rollover from another qualified 529 plan or education savings account to a CollegeBound 529 account. 529 Deposits Direct 529 Plan Re-contribution. States can set their own limit, however. But once you've entered the "529 withdrawal phase", be sure you make the right decisions when tapping your 529 account. 25% tax. IRA/401k withdrawals & redeposits. A 10% penalty may not sound like much, but combined with taxes, it can significantly cut into your net withdrawal amount. To process a request online: Log on to your account. The SECURE Act of 2019 expanded tax-free 529 plan withdrawals to include registered apprenticeship program expenses and up to $10,000 in student loan debt repayment for both account beneficiaries. A 529 plan offers tax-free earnings and tax-free withdrawals as long as the money is used to pay for qualified education expenses. For withdrawals made payable to the student or a school, the 1099-Q is sent to the student. ET. If you withdraw money from your 529 plan for a non-qualified purpose, the withdrawal will be subject to tax, including the additional 10% federal tax. Because of the way financial aid is determined, it’s generally best if the beneficiary’s parents own the account. Contributions to any state’s 529 plan of up to $1,500 per year by an individual, and up to $3,000 for a joint return are deductible in computing Minnesota taxable income. Then the funds are transferred. If under $10,000, you can endorse the schools refunded check and make it payable to OTTA. Select Make a Withdrawal from the options on the right. 5 million accounts, Virginia529 is the largest 529 plan available. I accidentally took a 529 withdrawal instead of making a contribution on my 1-year old son's 529 account yesterday. The Biggest 529 Withdrawal Mistake To Avoid. 5. $1,470. Name Change Authorization Form PDF. -529 distribution covering the qualified expenses is electronically transferred to the student’s checking account. A digital copy can be accessed through your online account. The ScholarShare College. 0 1,795 Reply. Account owners may redeposit funds that were previously withdrawn from Prepaid529 accounts. A 529 plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. In general, this includes costs of attending an eligible college or university. Step 3: Decide which 529 plan account to withdraw from, if applicable. e. But if you withdraw the 529 plan funds first, before. It's not like a Roth IRA. Log on to your account. Review the CollegeAmerica Program Description (PDF) for a complete guide to your 529 savings plan. You (the grandparent). However, if you contribute more money on behalf of the same child. There are some guidelines including: 1) The refunded amount must re-deposited within 60 days of the issuance of the refund; and 2) it must be deposited into a qualified 529 account. Historically, withdrawals from grandparent owned 529 plans have been considered untaxed income to the student and added to the student’s adjusted gross income on the FAFSA. On the "Overview" page, under Investments, select Make a Withdrawal. Earnings on your contributions grow tax free and withdrawals are not taxed if used for qualified educational expenses. For more information about Wisconsin's Edvest 529 College Savings Plan, call 1-888-338-3789 or click here for a Plan Description which includes investment objectives, risks. com: The ABCs of 529 savings plans; The Coverdell Education Savings Account (ESA) has a $2,000 annual contribution limit. If you do not have enough qualified expenses, then yes, you need to redeposit the 529 money. See What We Offer . Treat the Coverdell withdrawal as a tax-free "qualified distribution" on the beneficiary's income tax return. As the account. -The student writes a check to the school to cover all billed expenses. Price at NAV $49. You can also write “529 recontribution of 2020 refund” on the check memo line. Some 529 plans allow account owners to make electronic payments directly to the college. If you’re using 529 plan funds to pay student loan debt, there is a lifetime. The 60-Day Grace Period for Withdrawals From Retirement Accounts 2. NY 529 Direct Plan account owners benefit from tax-deferred earnings and tax-free withdrawals. You should have the following information at hand. Annual Roth IRA contribution limits apply to rollovers (in 2023, the limit is $6,500, which means it would take six years to convert $35,000 from a 529 plan to a Roth IRA) Conversions can only be made to a beneficiary’s Roth IRA; a parent saving with a 529. Any redeposit beyond that time frame counts as an unqualified withdrawal and triggers potential tax consequences. Open a 529: 529 Enrollment Application. -529 distribution covering the qualified expenses is electronically transferred to the student’s checking account. Now 529 funds are a bit different. Below are all the forms you should need to create and manage your NC 529 Account. 529 plans are state-run, tax-advantaged accounts that allow you to save for a child’s college education. Qualified withdrawals now include expenses related to apprenticeship programs and certain student loan payments. , December 31—to maximize any state tax breaks associated with those contributions. For example, Jake is a parent in Florida that has a 529 plan for his child. Yes – Moved the money to another retirement account (or returned it to the same retirement account). Made the $747 contribution I originally planned. minimum contribution. You have two options for each form. Instead of investing your money and risking a potential loss, you can use a pre-paid tuition program to pay for in-state tuition ahead of time, thus locking in a lower rate. January 2016. The amount of your service credit redeposit will be the cost of your withdrawal plus interest, compounded annually through the end of the current pay period. Tax penalties for nonqualified withdrawals. 50%. Step 3: Decide which 529 plan. Can you withdraw from your 529 plan at any time? Yes, you can withdraw from your 529 plan at any time. Most Popular Forms All Forms. Answer: Generally, if you withdraw money from a 529 for anything other than eligible college expenses, the earnings portion of each withdrawal will be subject to income taxes and a 10% early. You generally have 60 days from the date you receive the distribution from the plan to redeposit it as a rollover. These items must be used by the plan beneficiary while enrolled in college. Congress passed legislation in December 2015 that made three changes to 529 accounts. These plans are tax-advantaged and money contributed to them can be invested for example in mutual funds and exchange-traded funds, to allow for potential growth over time. The 529 plan must be at least 15 years old and rollover funds will still be subject to Roth annual contribution limits, which for 2023 is $6,500. Room & board costs are considered qualified only during. original Withdrawal was taken; 4) the portion of the refund you wish to redeposit must be a refund of Qualified Higher Education Expenses only; and 5) your redeposit amount cannot exceed the amount of the original Withdrawal from your Account. IR-2020-172, July 29, 2020 — The Internal Revenue Service provided a reminder today that the Coronavirus Aid, Relief, and Economic Security (CARES) Act can help eligible taxpayers in need by providing favorable tax treatment for withdrawals from retirement plans and IRAs and allowing certain retirement plans to offer expanded loan options. Fidelity manages plans for four states. 529 plan contributions are considered to be completed gifts to the beneficiary, and may be subject to federal gift tax. This is a qualified withdrawal for higher education expenses; or. This investment account allows you to grow the account tax-free and withdraw funds tax-free when used for qualified education expenses. Changes to qualified withdrawals from Oregon 529 Col-lege Savings Network accounts. For the 2023 tax year, the gift tax exclusion is $17,000 per recipient. To avoid certain tax consequences and penalties: • The funds you wish to redeposit must have been refunded by the student’s school and redeposited into a 529 account for that same student. These costs cover most of the required expenses to attend a higher education at a four-year college and university, two-year community college, trade or vocation school,. View All Ashbridge Strategy. The redeposit cannot exceed the amount of the original payout. Check with a local accountant to see how this may impact your state tax return. The UNIQUE College Investing Plan, U. If you take money from a Roth IRA before age 59 1/2 and it’s considered a non-qualified distribution, the IRS can apply a 10% early withdrawal penalty. Starting January 1, 2018, this definition is expanded to include up to $10,000 in K-12 tuition expenses per beneficiary per year. Families can also take a tax-free distribution to pay for tuition expenses at private, public and parochial elementary and. The purpose of the account is to help you save for medical costs. Use a 529 to pay for elementary and secondary school tuition. Most 529 plans let the account owners decide how they want their withdrawals to be paid out. The system will then navigate you through the process. As long as your qualified education expenses are greater than or equal to the amount withdrawn from the 529, you don't have to report anything about the withdrawal on your tax return. Consumer Reports explains how to withdraw money from a 529 college savings plan. 529 plans offer tax-free withdrawals when the funds are used to pay for qualified education expenses. So, you usually don't have to use all your tuition for the 529. Out of the $4,000 credit, I can keep $2,000 in books and iPad that I bought her for college, which I didn’t withdraw from the 529 account yet. While 529 withdrawal rules are fixed, there are ways to make non-qualified withdrawals without getting hit with that 10% penalty; these include: The student beneficiary receives a. An individual can put up to $17,000 in there in 2023, up from $16,000 in 2022 ($34,000 for married. Account owners may redeposit funds that were previously withdrawn from Prepaid529 accounts. The full specifics behind the ruling are as follows: In response to the pandemic, the IRS issued a notice giving account owners who received refunds prior to May 15 th until July 15 th to redeposit the funds in a 529 account. The intention of 529 plans is to encourage college savings. Consider a 529 withdrawal for a short-term emergency. Qualified Tuition Plans (QTP 529 Plans) Distributions. Planning. That means you can deposit up to $17,000 into 529 plans for your grandson, granddaughter, and niece, all in the same year. You can estimate the approximate cost by logging in to myCalPERS to get an estimate. Designating the distributee. How to Pay. Contributions to an NC 529 Account and earnings thereon can be used for a. The redeposit cannot exceed the amount of the original payout. Resize. The school your beneficiary attends is required to send out Form 1098-T to report the tuition and related expenses either paid or billed during the year. Using 529 Plan Withdrawals for Private Education. How to Pay. Normally, withdrawing from a 529 plan for nonqualified education expenses comes with potential taxes and penalties. A 529 plan is a tax-advantaged account made specifically for education savings—like colleges, trade schools, or vocational schools. Consult an attorney, tax professional, or other advisor regarding your specific legal or tax situation. Many parents pay tuition with cash or a credit card, and then reimburse themselves with the student’s 529 plan. A provision of the Further Consolidated Appropriations Act 2020 allows for 529 withdrawals to pay principal and interest on certain qualified education loans for the beneficiary of your account or any of the beneficiary’s siblings. 3. Residents with adjusted gross incomes of $75,000 or less are eligible to claim a tax credit equal to up to 50% of contributions, reduced by any withdrawals, with a maximum. It's also possible to contribute a lump sum of up to $85,000 to one or more 529 college savings plan in a single year (or $170,000 for couples) without being subject to the gift tax. • Type in the information and print out the completed form, or print clearly, preferably in capital letters and black ink. For more details about the Direct Plan's tax benefits, refer to the Disclosure Booklet and Tuition Savings Agreement. As of 2019, qualified. For withdrawals made payable to the account owner, the 1099-Q is sent to the account owner. TOOLS & CALCULATORS. Below are all the forms you should need to create and manage your NC 529 Account. If TurboTax is using the education expenses for either of these credits and is treating a portion of the 529 distribution as taxable as a result, even though the 10% additional-tax column shows an. Download Payroll direct deposit recontributed to your 529 College Savings Plan account will not be included in gross income for federal tax purposes; however, the original distribution will still be reported on your 1099-Q tax form. For more information on the different service credit options available to you, visit. But there’s more. If under. Due to 2018 tax reforms, parents can use up to $10,000 saved in 529 accounts to pay tuition for children attending kindergarten through 12 th grade. m. 03 as of 11/15/2023 (updated daily) Fund Assets (millions) $83,438. Helpful. Your withdrawal will take 2–4 business days from the time of your withdrawal request until the money is available in the account you are transferring to. Re: 529 Accidental Withdrawl query. If you withdraw more than the QHEE, the excess is a non-qualified distribution. Non-qualified withdrawals may also be subject to an additional 2. Your ScholarShare 529 funds can be used at any accredited university in the country—and even some abroad. Most states do set 529 max contribution limits somewhere between $235,000 and $529,000. Withdrawals made for qualified education expenses for the school year are federal tax-free. Just log on to your account and request a withdrawal. Be mindful of double dipping. States can set their own limit, however. 1 Wisconsin taxpayers can qualify for a 2023 state tax deduction up to $3,860 annually per beneficiary from contributions made into an Edvest 529 College Savings Plan (married couples filing separately and divorced parents may claim a maximum of $1,930). That means the person has 60 days from the moment they receive the distribution to roll it into another IRA or retirement plan. But if you take a nonqualified withdrawal, any earnings withdrawn are subject to federal income taxes plus a 10% federal penalty. Contributions. Answer: B (in most cases). Transfer on Death Registration Request Form PDF. Again, your earnings will not incur federal taxes as long as your payments go towards tuition. But, room and board (board even if the student lives at home) are qualified expenses for a 529 withdrawal. 1. College savings plans – These work a lot like a Roth 401 (k. a federal 10% penalty tax on earnings (as well as federal and state income taxes) may apply. 108,764 Clicked to Enroll. For more information about the Wealthfront 529 College Savings Plan (the “Plan”), download the Plan Description and Participation Agreement or request one by calling 844-995-8437 or emailing support@wealthfront. For example, an activity fee that all students are required to pay to fund all on-campus student organizations and activities. Select the appropriate account, click Next. 5 years old, this is an early withdrawal. 529 plans are flexible, tax-advantaged accounts designed for college savings. An HSA is a health savings account. 38. Tax-Free 529 Withdrawals — No income tax is paid on the growth of your account when withdrawals are used for 529 qualified expenses. You always have the option to transfer the 529 plan itself to the beneficiary (i. Generally, if you are age 73, you've reached the age where the IRS mandates you. Timing of 529 Plan Withdrawals Must Match Expenses. Forms that do not link to an online application are currently not available digitally. Your Bright Start account is flexible and can be used at eligible. Select one of the following: Yes. The earnings portion of 529 plan withdrawals must be used for qualified higher education expenses to maintain their tax-free status and avoid a 10 percent tax. The purpose of the account is to help you save for medical costs. The majority of plans offer two options – you can make an ACH deposit to your bank account, or have a check printed and mailed. Listen (2 min)Point No. 53%. The catch with an HSA is that you can’t open this account unless you have a high deductible health plan. As explained earlier, the earnings included in 529 account withdrawals that are not used to cover the account beneficiary’s qualified education expenses must be included in gross income. The 60-day rollover rules essentially keep people from taking money out of their retirement accounts tax-free. 5% California tax on. For those who are under 59. To process a request online, log on to your account, choose Go to my 529 plan account, and then select Withdrawal. The five-year period starts on the first day of the tax year in which you made the conversion. And—before you request that withdrawal—here are some tips to help you avoid some. In addition, your investment options are limited with a 529 plan, as opposed to a brokerage or Roth individual retirement account (IRA), which gives you complete freedom to buy and sell whichever securities you want. Select one of the following: Yes. SPONSOR CENTER. A 529 savings plan is a way to save for college that offers tax and financial benefits. Withdrawing too much money from your 529 plan results in paying income tax and a 10% penalty on the earnings for any amount that was not put towards qualified education expenses. Laura Saunders. When you invest in a 529 plan you can name a beneficiary and the money you invest will grow on a tax-deferred basis. The 529 College Savings Program helps you do just that. Yes, funds can be redeposited into Virginia529 accounts provided these guidelines are followed: the funds you wish to redeposit must have been refunded to you by your beneficiary’s eligible educational institution. a 529 plan. 3: The IRS Knows about Withdrawals. investors. Kantrowitz said, “provides families with greater. What is MOST 529? The MOST 529 Plan is Missouri’s own 529 education savings plan. Virginia529 has posted the Form 1099-Q to online accounts and physical. 529 Withdrawals. ↩. Hi, I've saved up some funds in my 529 plan, and my child attends a private grade school. There are, however, some exceptions that allow. Yes, funds can be redeposited into Virginia529 accounts provided these guidelines are followed: the funds you wish to redeposit must have been refunded to you by your beneficiary’s eligible educational institution. Most 529 plans include an administrative or annual fee, which tends to be around 0. Special notice to non-U. Fair enough. 116-136). So, if you wanted to roll over the entire $35,000 lifetime limit amount, you. com. 120-144 Month CD (10 to 12 years) 1. As with any investment, a 529 plan will experience market changes that. Enter the date and withdrawal amount. By . Include Schedule OR-529 with your Oregon personal income tax return. For any year that a 529 withdrawal is taken, the plan must issue a Form 1099-Q, Payments From Qualified Education Programs (Under Sections 529 and. OK, so maybe it’s not exactly up there with “wedding” or “birth of a child,” but for those who’ve been contributing to a 529 plan over the years (or decades) to offset the costs of college, this is a big day. A distribution from a pre-tax IRA account is typically subject to a 10% early withdrawal penalty if taken before 59 ½. Here’s a quick quiz: To reduce the impact on financial aid, the 529 account owner should be: Your grandchild (the student). A 529 can be a huge asset for a family with a college student, but misusing account funds will negate some of its benefits. 529 plans will allow money to be taken out for the exact amount of the scholarship or grant that has been awarded. Contact your 529 plan provider to find out how to proceed. qualified withdrawals from an ESA are not counted as income in calculating a student’s financial aid. 2. Now college is closer and it's time to think about spending the money you've put aside. Tuition up to $10,000 per year, per beneficiary at an elementary or secondary public, private, or religious school. In addition to college expenses, you can also spend up to $10,000 per year on tuition expenses for elementary, middle,. There are several scenarios in which you can make non-qualified 529 plan withdrawals and avoid paying the 10% penalty. The annual gift tax exclusion limit is the amount you can give away without having to file a gift tax return. 2. 529 Withdrawals. -Keep any records needed to document this process. If the beneficiary withdraws from the account later for qualified educational expenses then those. Under a special rule for 529 plans, you can elect to treat a contribution up to. Here’s why: 1. All states offer 529 plans (except for Wyoming), and there are two types: Savings plans (savings are. Taxable earnings. Individuals may contribute up to five-times the annual gifting exclusion (currently set at $17,000) in a single year, for a maximum $85,000 (or $170,000 for joint filers) without incurring gift tax, as long as the individual does not make any subsequent contributions. Just about anybody can open a 529 account—parents, grandparents, other relatives, friends—as long as he or she is a U. Exceptions to 529 withdrawal penalties. Withdrawals from a 529 plan account; Take advantage of professional money management experience from Fidelity. I was not paying close enough…For example, Michigan residents who contribute to a Michigan 529 plan owned by another person may deduct up to $5,000 ($10,000 if married) of 529 plan contributions from state taxable income. 2 For the tax year 2023, there’s no federal gift tax on contributions made up to $17,000 per year for a single filer, or $34,000 for a married couple. ” This will avoid taxes. If the beneficiary gets a scholarship, uses their GI Bill benefits, enlists in the military, or enrolls in a service academy, they can withdraw funds from their 529 without. But if you’re saving for college, you’ll want to know that 529 savings plans offer other tax benefits, such as tax-free earnings growth and tax-free withdrawals for qualified expenses. K-12 expenses. – 6 p. This allows them to use it for a later date or make their own early withdrawals (which will of course be subject to penalties and taxes). Unlike the Coverdell ESA, qualified expenses for elementary and secondary education (K-12) are limited in Section 529 plans to $10,000. , your child once they are of age). Check to see if your tax return includes Form 8863 and any amount on Schedule 3 line 50. Learn about the tax consequences if 529 funds are used for an unqualified expense, what the exceptions to the penalty are, and how to redeposit 529. Those who received refunds after May 15 th have 60 days from the date of the refund. Also, if you access any gains, you are subject to potential fees and taxes. 529 savings plans : Withdraw from Your 529: Vanguard 529 Withdrawal Request Kit. But, your state might tax-advantage 529 contributions. Click on the document titles below to view forms. When you take a distribution you will get a 1099Q which needs to be. If that doesn't happen within 60 days, the IRS figures this distribution is a withdrawal. Log on to your account. Join Upromise for free today: Earn $5. The IRS views the money as an annual $17,000 (or $34,000 for couples) gift over five years. If you contribute money to a qualified tuition program, such as a 529 plan or a Coverdell ESA, you will likely receive an IRS Form 1099-Q in each year you make withdrawals to pay school expenses of the beneficiary. 2 If the funds aren’t used for qualified higher education. Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917. original Withdrawal was taken; 4) the portion of the refund you wish to redeposit must be a refund of Qualified Higher Education Expenses only; and 5) your redeposit amount cannot exceed the amount of the original Withdrawal. Cyber1001 said "Otherwise, I might have to pay tax for the capital gain of the money withdrawn from 529 plan. An individual has up to three years to pay the taxes on the early withdrawal or to redeposit the money back into their retirement account (versus the standard repayment requirement of 60 days). A 529 college savings plan is one of the best ways to squirrel away money due to its impressive list of available uses and tax deductions. Use the following steps to figure the taxable part. by GreendaleCC » Thu Nov 16, 2023 1:52 am. Log in and request a withdrawal online. 3,4 Most importantly, you can use your 529 funds at most post-secondary schools nationwide. a federal 10% penalty tax on earnings (as well as federal and state income taxes) may apply. Answer: Generally, if you withdraw money from a 529 for anything other than eligible college expenses, the earnings portion of each withdrawal will be subject to income taxes and a 10% early. There are no withdrawal limits for distributions used for post-secondary higher education, but there is a $10,000 annual withdrawal limit when funds are used for primary or secondary education. You can call your plan administrator, make a request online, or submit a withdrawal request form. 4. 529 plans are tax-advantaged savings plan named after Section 529 of the Internal Revenue Code. Please note that refunds from K-12 schools are NOT eligible for recontribution. To make a transfer of a Coverdell ESA to a 529 savings plan you would follow these steps: Request a withdrawal from the Coverdell ESA. If you withdraw money from your 401 (k) before you’re 59 ½, the IRS usually assesses a 10% tax as an early distribution penalty. The key to avoiding costly penalties and additional taxes is to follow the rules of your 529. Helpful tips: Taking money out of your 529 plan account won't be difficult. That includes both religious and charter schools that enroll students from kindergarten through 12th grade. That means that you cannot use more than $9,800 per year from your 529 plan to be “qualified”. The ScholarShare. Once I choose a 529 college savings plan and its underlying investments, I am locked in and cannot make. For 529 funds those can be used to pay for the qualified education expenses of tuition, books, and lab. S. But, if the money is not used for qualified education expenses, federal income taxes may be due on any earnings withdrawn. State Tax Deduction — Deduct your contributions from your taxable income. Rollovers from 529 plans to Roth IRAs are only permitted if certain criteria are met including: 529 plan beneficiaries can roll over up to $35,000 to a Roth IRA over their lifetime. There's also the option to pay for K-12 tuition (up to $10,000 a year per student). Invests primarily in well-established companies with strong balance sheets and a history of consistently paying dividends, helping to provide downside resilience. The 10% additional tax also does not apply as a result of withdrawals made due to the death or disability of the designated beneficiary. Qualified Expenses. State Tax Deduction — Deduct your contributions from your taxable income. For withdrawals made payable to the account owner, the 1099-Q is sent to the account owner. You will get a 1099Q showing the withdrawal and will probably owe tac es and penalty. You can then use the remaining withdrawal of $3,500 as a contribution to your Roth IRA in the next year, plus $3,500 more to bring it up to the $7,000 2024 contribution limit. Here are six mistakes you'll want to avoid: 1. Using a 529 plan to cover college costs can be a great way to minimize the need for student loans. Before sending a completed form to American Funds, make sure it has all the. The last thing you want to do after years of saving to pay for college is facing a bunch of tax penalties. Start the process by logging into your account. But if you withdraw the 529 plan funds first,. Fee Score. That means that you cannot use more than $9,800 per year from your 529 plan to be “qualified”. How Our 529 Works. Taking too much money. Three flexible, affordable, tax-advantaged programs– Prepaid529, Invest529 and CollegeAmerica®, along with early commitment. Rollovers are. If you put $1000 in an index fund and wait a year, you could end up with (say) $1050, and that extra $50 is non-taxed.