How to make withdrawals
Time to pay that tuition bill? Here is what you need to know about making withdrawals from your College Savings Iowa 529 account.
- Under My Accounts, choose the appropriate account to act on.
- On the Overview page, select Make a Withdrawal.
- Select Yes. This is a qualified withdrawal.; or No. This is a non-qualified withdrawal. Then follow the instructions.
Note: Remember to enter the student's ID number in the memo field if your withdrawal is going directly to the school.
- Submit your request.
By U.S. mail
- Complete all sections of the form and sign where indicated.
Note: If the withdrawal is going to the school, enter the student's ID in Section 3 of the form, and write it in the memo section of your check.
- Mail your completed form to:
Michael L. Fitzgerald
Treasurer of State
College Savings Iowa Service Center
P.O. Box 219219
Kansas City, MO 64121-9219
You will need to provide your account, beneficiary (student) and school information (such as the student's ID number and the school's address). Call 888-672-9116.
Please allow 10 business days (plus mailing time, if applicable) for the funds to arrive.
All qualified withdrawals requested online or by phone may be sent:
- By check to the College Savings Iowa participant, the student or the school.
- Electronically if bank instructions are established on your account.
If you intend to add or change bank information, please factor in a 15-calendar-day verification period, during which assets cannot be sent to the bank.
More about withdrawals
How can I use the money in my account?
Your account can be used for any purpose. However, for your withdrawals to be considered tax-free, the money must be used for the student's qualified education expenses at an eligible educational institution.*
*The earnings portion of nonqualified withdrawals is subject to federal income tax and a 10% federal penalty tax, and may be subject to state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.
What are qualified education expenses?
Qualified higher-education expenses include tuition; mandatory fees; books; required supplies; computers, including related hardware (e.g., printers) and software, internet access and related services; equipment required for enrollment or attendance; room and board during any academic period the student is enrolled at least half-time; and certain expenses for a special needs student.
Beginning in 2018, qualified education expenses for federal tax benefit purposes also include K-12 tuition at public, private or religious schools up to $10,000 per year per student in the aggregate across all qualified tuition programs for a designated student. In addition, Iowa taxpayers can use the College Savings Iowa 529 Plan assets to pay for K-12 tuition with no Iowa state tax consequences as long as the student attends an elementary or secondary school in the state of Iowa which is accredited under the Iowa Code Section 256.11 and adheres to the provisions of the federal Civil Rights Act of 1964 and Iowa Code Chapter 216. State tax treatment of K-12 withdrawals is determined by the state(s) where the taxpayer files state income tax. If you are not an Iowa taxpayer, please consult with a tax advisor.
Refer to IRS Publication 970 for more detailed information on eligible expenses.
What if I do not use the money in my account for a qualified education expense?
The earnings portion of a distribution not used for a student's qualified education expenses is subject to federal taxes and a 10% federal penalty tax and may be subject to state income taxes. Exceptions to this penalty include a withdrawal made because the student:
- Has died or become disabled.
- Received a scholarship, to the extent the withdrawal amount does not exceed the scholarship amount.
- Has enrolled in the U.S. Military Academy, the U.S. Naval Academy, the U.S. Air Force Academy, the U.S. Coast Guard Academy, or the U.S. Merchant Marine Academy, to the extent that the amount of the withdrawal does not exceed the costs of advanced education attributable to such attendance.
Any accumulated earnings that are withdrawn from your account must be included on the income tax return of the recipient for the tax year in which they are distributed. Contact your tax advisor about how to report a nonqualified withdrawal.
For Iowa taxpayers, any previous deductions must be added back to Iowa taxable income in the year of the distribution.
What tax forms will I receive?
The College Savings Iowa 529 Plan will generate a Form 1099-Q in January of the calendar year following a year in which there was a withdrawal from the account. The recipient of the Form 1099-Q will be either the plan participant or the student, depending upon who received the proceeds of the withdrawal.
Withdrawals sent to the plan participant will be reported under his or her Social Security number. Withdrawals sent to the student or to an educational institution will be reported under the student's Social Security number per IRS guidelines.