Tax consequences of liquidating 529

But note: this special rule applies only if your child files the FAFSA as your dependent, which is the case for the vast majority of undergraduates.

These plans are sponsored by the state to help families fund future college costs with tax benefits granted by Section 529 of the IRS Code. We pay full in-state or in-district undergraduate tuition and mandatory fees at any Illinois public university or community college in your plan.

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Because minors generally cannot directly own an investment or bank account, an adult custodian must manage and use the funds for the benefit of the minor child as prescribed under the state's Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA).

Another name frequently used for a 529 account opened with UGMA/UTMA money is "custodial 529 account." Nearly all 529 savings plans have special procedures to accommodate UGMA/UTMA 529s.

Qualified Education Expenses Generally, qualified education expenses include the following: Tax Treatment of Distributions A distribution from a 529 plan that is not used for qualified educational expenses may be subject to income tax and an additional 10% early-distribution penalty.

The penalty will be waived, however, if the distribution occurs for any of the following reasons: On a state level, the tax treatment for distributions varies.

Individuals should consult with their tax professional to determine how distributions from their 529 plans will be treated for tax purposes.

It refers to account in a 529 plan funded with money already owned by your minor child.For example, the plan administrator will not permit changes in the beneficiary designation prior to the current beneficiary's 18th or 21st birthday (depending on the state).And when the current beneficiary reaches the age of legal ownership, he or she will have the right to contact the 529 plan administrator and take direct ownership and control of the 529 account.There are 2 types of 529 plans - prepaid tuition plans and college savings plans. The College Savings Plans Network is the national organization of all 529 plans and is an additional resource for information.* No. Plus, your benefits can be used toward tuition and fees at most Illinois private colleges, and even at colleges and universities throughout the country.Unused benefits may be transferred to a member of the Beneficiary’s family as defined by the Internal Revenue Service (The list of eligible family members is extensive).This does not include equipment of a kind used primarily for amusement or entertainment.

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