Three Options for Excess 529 Plan Funds

Saving for college with a 529 plan is catching on. Savingforcollege.com’s 2016 Annual College Savings Survey found that among families who don’t yet have a 529 college savings plan, 62% intend to open one, a substantial jump from 2015 when 52% respondents wanted to open one. However, confusion persists about how the plans function including what happens to excess 529 plan funds.

Questions about leftover money in the plan are one I hear often. Parents and grandparents want to save enough to cover a significant portion of their children’s college education. But knowing how much that will be is not an exact science. We are aware that the average cost of a four-year degree is going up. But who knows what will happen in the next couple of decades? Will your child start out at a community college before transferring to a university? Will they receive academic or athletic scholarships?

Fortunately, even if your child receives enough scholarship money that he or she doesn’t need a single dollar of 529 plan savings, that money is still yours to keep.

Options for using excess 529 plan funds

Use it

Money saved in a 529 plan account is not just for tuition. Even if your child receives a full-tuition scholarship, you will likely incur other expenses such as books, housing, lab fees, and computer equipment. In 2009, qualified, Congress broadened the definition of nontaxable distributions from 529 plans to include the costs of computer technology, equipment, and even internet access. In 2017, they changed the rules again to allow families to use up to $10,000 per year for tuition at elementary or secondary schools.

No rule states 529 funds must be used for traditional college degrees. The student can use the fund to cover classes at any eligible educational institution. The IRS defines “eligible educational institution” as any college, university, vocational school, or other postsecondary educational institution that is eligible to participate in a student aid program administered by the U.S. Department of Education. The student may want to hold on to excess funds to cover grad school, continuing education or personal interest classes in the future.

Keep it in the plan

The account owner can also become the beneficiary of the plan and use the funds for their own education. Many parents find themselves pursuing additional education after the kids are out of the house. You can save your excess 529 funds for those purposes.

Take the money and run

529 Plan accounts are not “use it or lose it” accounts. The money in the account is always your to withdraw, but you will owe tax on the earnings when you withdraw money for non-qualified expenses. Also, 529 plan contributions are made with after-tax dollars, so you’ll never owe tax on the deposits to the plan, only the earnings. Those earnings will also be subject to a 10% penalty on the amount included in income.

You can avoid the 10% penalty if your child does not need the money because he or she received tax-free scholarships and grants, veteran’s educational assistance, or employer-paid educational assistance, or attends a U.S. Military Academy. In those cases, you can withdraw the funds and pay tax on the earnings but avoid the 10% penalty.

Make sure you know what kind of plan you have before choosing to withdraw funds. Some prepaid tuition plans – those that allow parents to purchase college credits at current rates – may only allow you to withdraw the principal invested in the plan. In that case, you would lose out on any earnings.

Due to poor investment management or a down stock market, your 529 plan may be worth less than the amount you put in. In that case, you won’t owe tax or the 10% penalty.

This post originally appeared on Forbes.com

000

Comments (139)

  1. thca 2 months ago

    If you can’t be good be careful.

  2. Tomorrow is often the busiest day of the week.

  3. fxgcpselvd 4 weeks ago

    Muchas gracias. ?Como puedo iniciar sesion?

  4. Davidcheah 3 weeks ago

    cheap ed pills cheap ed pills
    cheap ed pills from india

  5. AnthonyHog 3 weeks ago

    prednisone 10mg prices: buy prednisone online – over the counter prednisone cream

  6. AnthonyHog 3 weeks ago

    buying prednisone: buy prednisone – prednisone otc uk

  7. AlbertRen 2 weeks ago

    https://zithromaxproff.com/# zithromax capsules 250mg
    buy generic zithromax online

  8. Money Loan 2 weeks ago
  9. AlbertRen 2 weeks ago

    http://zithromaxproff.com/# buy zithromax online with mastercard
    buy cheap zithromax online

  10. AlbertRen 2 weeks ago

    https://zithromaxproff.com/# how to get zithromax
    zithromax 500mg over the counter

  11. best insurance 2 weeks ago
  12. Raymondclima 2 weeks ago

    panmycin online: order floxin
    myambutol generic

  13. Raymondclima 2 weeks ago

    buy cleocin generic: order panmycin online
    trimox capsules

  14. Williamflame 1 week ago

    india pharmacies online: prescriptions from india india pharmacies online

  15. Williamflame 1 week ago

    overseas pharmacies shipping to usa: meds from india india pharmacy drugs

  16. Lisapoema 1 week ago
  17. DennisSmask 6 days ago

    over the counter ed medication: order erectile dysfunction pills kamagra pills

  18. zortilonrel 6 days ago

    Please let me know if you’re looking for a author for your blog. You have some really good posts and I think I would be a good asset. If you ever want to take some of the load off, I’d love to write some articles for your blog in exchange for a link back to mine. Please send me an email if interested. Regards!

  19. DennisSmask 6 days ago

    best male erectile dysfunction pill: viagra pills best erectile dysfunction pills

  20. DaniloGat 5 days ago

    mature adult phone chat
    local milfs

  21. Amypoema 5 days ago
  22. Hey, I think your website might be having browser compatibility issues.
    When I look at your website in Safari, it looks fine but
    when opening in Internet Explorer, it has some overlapping.
    I just wanted to give you a quick heads up! Other then that,
    amazing blog! 0mniartist asmr

  23. Quick Loan 4 days ago
  24. KeithLurne 4 days ago

    mail order viagra buy viagra online without prescription viagra prescription

  25. Takipçi satın al 3 days ago

    Size yayılan takipçi hizmetleriyle basit bir şekilde
    instagram profilinizi büyütebilirsiniz.
    Şirketin hizmetlerinden faydalanarak dilediğiniz kadar
    takipçiye ulaşabilirsiniz, Takipçi satın al işlemi oldukça basit ve
    kısa süreçte size teslim edilmektedir.
    Yapmanız gereken tek şey Takip2018 e sadece giriş yaparak
    dilediğiniz kadar takipçi isteği yapabilirsiniz.
    Size uygun paketi seçmeniz halinde dilediğiniz alabilir ve sadece izlersiniz.
    Benzersiz hizmet vererek size daha çeşitli paketler önerebiliyor..

  26. Timothyphiny 3 days ago

    free chat online singles
    free meet me site

  27. Özellikle İnstagram tarafından satış yapan bireylerin güvenilirliğini çoğaltmak amacıyla çok sayıda
    takipçiye, beğeniye ya da yoruma gereksinimi var.
    Bu nedenlerden ötürü çoğu değişik firma satış
    yaparak abone adedinin artırılması kullanıcı talebini kolaylaştırmaktadır.

    Google ve diğer arama motorlarında da günde binlerce şahıs instagram takipçi satın al arama sözcüğü
    ve türevleri ile arama yapıyorlar
    tam bu devrede işte bu site devreye giriyor ve size en kaliteli ve güvenilir takipçi
    satışı sağlıyor

    .

  28. ucuz takipçi 3 days ago

    Instagram ucuz takipçi almak işe yarar mı?

    Her alanda olduğu gibi Instagram takipçi alma seçenekleri arasında
    ucuz takipçiler satılmaktadır,
    Maalesef ki ucuz takipçi size
    Takip2018de olabilmesi sizin profilinizi kirletmeyecek kadar
    olan paketler bulundurur.

    Kesinlikle sadece satış yapmak için ucuz takipçi satmamaktadır.

    Bot takipçiler yada hemen düşecek takipçi bulundurmazlar.

    Sizin paranızı çöp etmezler

  29. Hello, its nice post regarding media print, we all be aware of media is a
    enormous source of facts.

  30. beğeni satın al 3 days ago

    Instagram da takipçi satın almak kadar Beğeni satın al için de biraz
    araştırma yapmalısınız.
    Çünki 10binlerce takipçisi olan kişilerin beğenileri de
    fazla olmalıdır, Beğenilerinizi gören herkes size hayranlık
    duyacaklardır bu sebepten beğeni paketlerini inceleyebilir
    Kendinize uygun instagram beğeni paketini seçerek satın alın

  31. Türk takipçi Satın Al işlemi ne kadar önemlidir?

    Instagram takipçi satın almak önemlidir tabiki de bu durumda aktif olmaları ayrıca TÜRK takipçi olmasını isteriz.

    Yılların verdiği tecrübeye dayanarak size en iyi önerebileceğimiz site
    türk takipçi satın al konusunda uzman kadrosu ile takip
    2018′ dir
    Türk takipçi paketlerini incelemek için siteyi ziyaret etmekten çekinmeyiniz.

  32. It’s an awesome post in support of all the web people;
    they will take advantage from it I am sure.

  33. Shell Download 3 days ago

    Thanks in favor of sharing such a pleasant idea, post is good, thats why
    i have read it fully

  34. Hi! I just wanted to ask if you ever have any problems with hackers?
    My last blog (wordpress) was hacked and I ended up losing a few months of
    hard work due to no backup. Do you have any solutions to protect against hackers?
    asmr 0mniartist

  35. KeithLurne 2 days ago

    buy generic viagra online viagra no prescription viagra without a doctor prescription usa

  36. Timothyphiny 2 days ago

    free local personal ads
    free local personals

  37. 0mniartist 2 days ago

    Hi my family member! I wish to say that this post is awesome,
    great written and include approximately all vital infos.
    I would like to peer more posts like this .

    asmr 0mniartist

  38. I love you 2 days ago

    Sorry baby

  39. zortilo nrel 2 days ago

    Very nice post. I simply stumbled upon your weblog and wanted to say that I have truly loved browsing your weblog posts. After all I’ll be subscribing on your feed and I hope you write once more soon!

  40. Payday 23 hours ago
  41. JasonUnery 5 hours ago

    https://doxycyclinest.com/# where can i get doxycycline

Leave a reply

Your email address will not be published. Required fields are marked *

*