If you'll soon be facing those long-anticipated education expenses, don't worry. Taking money out of your 529 plan account won't be difficult. Simply follow these steps.
To process a request online:
- Log on to your account.
- Select Make a Withdrawal from the options on the right.
- Select the appropriate account, click Next.
- The system will then navigate you through the process.
Or you can mail the Plan a completed Withdrawal Request Form. Download the form here.
Before you request that withdrawal, here are some tips to help you avoid some common mistakes.
Don't wait too long
No matter how you receive the proceeds, be sure to make your withdrawal request in time for you to meet your payment deadline by allowing extra time for processing during periods of heavy volume. Withdrawal requests can take up to 5 days to process during periods of market volatility and at year end.
Remember that if you request the proceeds by check, it will typically be mailed to you or the school within 3 business days after the trade date, but please allow 10 business days for the check to be received. If you request that the proceeds be sent electronically to you, you will need to have banking information set up 15 days prior to making the request.
You could also pay the school invoice when you receive it, then take the distribution from your 529 account as a reimbursement. If you want to receive a check, allow at least 10 business days. Keep in mind, if you have not added banking instructions to your account, give yourself additional time for your bank information to be verified. As long as you keep the documentation needed for IRS purposes, this can help reduce the anxiety of tight timelines.
Map out a withdrawal plan
Think about spreading out your withdrawals. If you do so over the 4 years of college, you'll be less likely to withdraw more than your yearly qualified expenses.
If you can, keep making contributions. Even if the money won’t be in the account a long time, you’ll pay less income tax, and you won’t miss out if your state offers a tax deduction or credit.
Take out the right amount
If you withdraw more than you need, that excess must be reported as taxable income by either you or the beneficiary. When you're calculating your withdrawal amount, don't forget to:
- Subtract any scholarship or grant money from the amount you're planning to withdraw.
- Deduct any federal tax credits, like the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit
Withdraw only for qualified expenses
Any earnings you withdraw are free from federal income taxes when used for qualified expenses.*
Qualified expenses include tuition, fees, books, equipment (such as computers, internet access, and computer software), certain room and board expenses, and certain expenses for students with special needs.**
For more information, refer to IRS Publication 970, Tax Benefits for Education.
Ready to request a withdrawal?
Refer to these instructions, which explain how to do so online, by phone, or by form.