Tax Savings Tips: October 2021
Taxation of 529 College Savings Account Withdrawals The big advantage of 529 plans is that qualified withdrawals are always federal-income-tax-free—and usually state-income-tax-free too. What you may not know is that not all 529 withdrawals are tax-free qualified withdrawals, even in years when you have heavy college costs. Here are six important points to know about 529 withdrawals. Point No. 1: You Usually Have Several Payment Options Say you are the 529 account owner or plan participant . Plans commonly use both terms to describe the person who established and controls the account. This letter will use account owner. As the account owner, y ou can generally have a withdrawal check cut in your own name or have an electronic deposit made into your own account. Alternatively, you can have a withdrawal issued in the name of the account beneficiary (the college student for whom you set up the 529 account, usually a child or grandchild) or