Investing in a 529 plan is a valuable college savings strategy; however, certain rules related to 529 account distributions are often overlooked. These nuances may not become apparent until after a distribution has occurred, potentially resulting in unexpected tax liabilities for the account owner.

What qualifies as eligible expenses for tax-free distributions from a 529 plan? What are the tax consequences of using 529 plan assets for nonqualified expenses? How do the American Opportunity and Lifetime Learning Tax Credits impact the taxability of these distributions? The flowchart below is designed to clarify these issues and assist you in navigating the complexities associated with 529 plan distributions.

Is The Distribution From My 529 Plan Subject to Federal Income Tax?

While checklists and flowcharts can help you identify different opportunities, we are always available to meet with you to discuss your financial needs and goals, and to help identify what the best opportunities are for you.

 

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