If you take a non-qualified distribution from your 529 plan, the penalties are two-fold. 529 plan assets are counted at different rates for the Expected Family Contribution (EFC) in the FAFSA formula. The state of Connecticut offers 529 plans via the Connecticut Higher Education Trust. Start an account in 15 minutes with only $25. A 529 plan allows you to save and grow tax-free money for someone’s education, including your own. However, a recapture requirement may be difficult for the Department of Revenue Services (DRS) to enforce. Accessed Nov. 11, 2019. CollegeAmerica 529 Plans. For this reason, we may request additional information from you during log in. Systematic Withdrawal Program • Complete this section to establish periodic withdrawals for your CHET Advisor Account. They … non-qualified) 529 money is later withdrawn. They also avoid the risk that the school’s financial aid office will view the payment as some sort of scholarship, and reduce the student’s financial aid package accordingly. The books listed in your course syllabus along with the supplies needed for class can be paid for with 529 plan funds. A 529 plan can be a great tool to save for the college expenses of a child or other loved one. 3. As of July 1, 2009, federal guidelines are as follows: If the student is a dependent, a 529 plan account is considered as the parent's asset (if the account owner is the parent or the dependent student). Taking too much money. College Savings Plan Network. Connecticut Higher Education Trust (CHET) PO Box 219125 Kansas City, MO 64121-9125 Connecticut Higher Education Trust (CHET) 430 W 7th Street Suite 219125 Kansas City, MO 64105-1407: With a minimum $25 dollar contribution, you can make an additional one-time payment using a personal check, Teller’s Check, Money Order or Cashier’s check. Once the funds are released, you’ll need a completed Form 1099-Q from the IRS. Paying for Off-Campus Housing with a 529 Plan Your student's room and board could be covered tax-free for an entire 12-month lease, even if he or … Paying for rent, books, and supplies would be a better option for these funds and won’t subject you to a penalty. Using A 529 Plan To Pay Student Loans . The most common—post-high school education . This federal expansion of 529 plans affects the CHET program (Connecticut’s state-sponsored 529 plan) because it operates pursuant to federal law. Only gains are subject to taxation and a 10% penalty if you've contributed after-tax money. Many students receive scholarships, occasionally resulting in 529 balances that are not needed to pay for college. How much is the maximum tax-free withdrawal? Or if the withdrawal occurs in December for expenses previously paid during that year. Finances After 40. CHET is open for investment by residents in any state. ABLE Accounts. This form is specifically for 529 plan spending and ensures your taxes are calculated accurately, and you are not subject to penalties. The 529 plan manager or custodian will complete this form and send the student, parent, and IRS a copy. The earnings portion of the non-qualified distribution will be reportable as ordinary income, but the 10 percent penalty on earnings is waived. Planning LIFE MOMENTS. The most important thing to know about penalties and your 529 plan is that your principal can always be withdrawn without penalty. Fees for athletics, sports clubs, or school-sponsored groups or campus events can’t be paid with 529 plan funds. Of course, if income phase-outs prevent the taxpayer from claiming the AOTC, the $4,000 adjustment need not be made. Can you choose another beneficiary? Many plans require that the college be paid directly for education expenses; others will prepay or reimburse the beneficiary for such expenses (receipts or other proof may be required). Remember to ask for a scholarship receipt for your tax records. Withdrawals from a 529 plan that are used to pay qualified higher education expenses are completely free from federal income tax and may also be exempt from state income tax. Since most non-qualified withdrawals are penalized, you should only do so after carefully examining all your options. Should I Use a Coverdell or 529 for My Child’s Education? Beware of non-qualified withdrawals The 10 percent penalty on a non-qualified distribution from a 529 plan is waived when the excess distribution can be attributed to tax-free scholarships. Planning. Instead, the burden of calculating qualified education expenses and thus calculating the taxable and non-taxable portions of the 529 distribution is solely the responsibility of the tax payer. 2.5 of 5. At the end of 2015, congress passed and the president signed a bipartisan bill called the ABLE Act that expands the current 529 college savings program to allow tax-free accounts to be used for children with a disability. Qualified higher education expenses generally include tuition, fees, books, supplies, and equipment required for enrollment or attendance at an "eligible" educational institution. Your 529 plan has specific rules for spending in return for those 529 tax benefits and other advantages. Similar to other TIAA-managed 529 savings programs, the Connecticut Higher Education Trust (CHET) features three age-based options along with eight static investment options. "Investor Bulletin: 10 Questions to Consider Before Opening a 529 Account," Accessed Nov. 13, 2019. 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