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 one of the following options, then follow the instructions:
Yes. This is a qualified withdrawal.
Yes. This is a qualified withdrawal for K-12 tuition expenses.
No. This is a non-qualified withdrawal.
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 withdrawals from your account can be used to pay for tuition, room and board (with limitations), books, supplies, fees and equipment required for enrollment or attendance at any eligible educational institution in the United States or abroad, as well as computers or certain peripheral equipment, certain computer software or internet access and related services that are to be used primarily by the Beneficiary during any of the years the Beneficiary is enrolled at an eligible educational institution.
Qualified withdrawals can also be used for tuition expenses in connection with enrollment at an elementary or secondary public, private or religious school. Section 529 permits withdrawals from 529 college savings accounts up to an aggregate of $10,000 per year per student for tuition expenses in connection with enrollment at a K-12 Institution. 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 Iowa Code Section 256.11 and adheres to the provisions of the federal Civil Rights Act of 1964 and Iowa Code Chapter 216, or (ii) an elementary or secondary school located outside the state of Iowa that educates a Beneficiary who meets the definition of “children requiring special education” in Iowa Code Section 265B.2, if the elementary or secondary school is accredited under the laws of the state in which it is located and adhere to the Federal Civil Rights Act of 1964 and applicable state law analogous to Iowa Code Chapter 216, or (ii) an elementary or secondary school located outside the state of Iowa that educates a Beneficiary who meets the definition of “children requiring special education” in Iowa Code Section 265B.2, if the elementary or secondary school is accredited under the laws of the state in which it is located and adhere to the Federal Civil Rights Act of 1964 and applicable state law analogous to 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.
Additionally, qualified withdrawals include (1) fees, books, supplies and equipment required for participation in an apprenticeship program registered and certified with the Secretary of Labor under the National Apprenticeship Act, and (2) amounts paid as principal or interest on any qualified education loan of the beneficiary or a sibling of the beneficiary; provided that the total amount that may be used from all accounts for repayment of loans of a beneficiary may not exceed $10,000. You should consult your tax advisor for more information.
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.