By contrast, the Virginia 529 program so far has seen about 800 accounts opened for K-12 expenses, or just 1.6% of the 50,000 new accounts that open on average each year, Morris said. So, should they send back the money as a rollover contribution? U.S. Securities and Exchange Commission. 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. Department of Treasury. They … 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). I see the advantage here as being better control over the flow of funds. CHET is open for investment by residents in any state. Start an account in 15 minutes with only $25. That's huge.". 529 withdrawals are tax-free to the extent your child (or other account beneficiary) incurs qualified education expenses (QHEE) during the year. How to Make an Early Withdrawal From Your IRA Without Paying the Fee, How 529s Affect Scholarships (and Vice Versa). Every year the same story plays out: It’s December and an account owner has a time-sensitive withdrawal. CHET Advisor is administered by the Treasurer of the State of Connecticut as the Trustee of the Connecticut Higher Education Trust Program, and Hartford Funds Management Company, LLC serves as Plan manager. Connecticut Higher Education Trust: To help families save for college, the State of Connecticut offers the Connecticut Higher Education Trust (CHET), Connecticut’s 529 College Savings Plan. "Tax Benefits for Education," Page 59. But once you’ve entered the “529 withdrawal phase”, be sure you make the right decisions when tapping your 529 account. Beneficiaries must spend the money on qualified education expenses for the withdrawal to … The same rules that apply when using 529 funds to pay for college in the U.S. carry over when using the money to cover the cost of studying abroad. In many cases, a better strategy is available that will allow you to keep more of the funds you’ve worked so hard to accumulate. Funds from a 529 savings plan aren't just for tuition. Absolutely not. Why go through this process if you can avoid it by ensuring the Form 1099-Q goes to the beneficiary? (See the discussion above concerning the expense adjustment for the AOTC.) Using CHET Funds . Of course, if income phase-outs prevent the taxpayer from claiming the AOTC, the $4,000 adjustment need not be made. However, you will not be taxed on the distribution as the funds were used to pay for qualifying education expenses. No × Log In Help. Past performance is not indicative of future results. 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. Towards year-end, 529 account owners should sit down and figure out exactly how much was spent on qualified expenses during the year and make the appropriate “catch-up” distribution from the 529 plan. 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. It's easy to put money into a 529 college savings plan, but withdrawing money from the account can be more complicated. Treasurer Shawn T. Wooden is Trustee of CHET. 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 … You can request a withdrawal online, by mail or via phone. Only the earnings portion of a non-qualified 529 plan distribution is subject to a 10% withdrawal penalty. They typically have three options: (1) a check made out to the account owner, (2) a check made out to the account beneficiary, or (3) a check made out to the educational institution (or jointly to the institution and the beneficiary). 8. FORGOT usernameUpper. TOOLS & CALCULATORS. Most 529 plans let the account owners decide how they want their withdrawals to be paid out. The latest articles and tips to help parents stay on track with saving and paying for college, delivered to your inbox every week. The Biggest 529 Withdrawal Mistake To Avoid. 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. What Is an Eligible Educational Institution? As long as the beneficiary incurs sufficient qualified higher education expenses, the distribution remains tax-free to the account owner. If your clients’ children are heading to college soon, it’s time to start considering 529 withdrawal strategies. null. The earnings portion of 529 plan withdrawals must be used for qualified higher education expenses to maintain their tax-free status and avoid a 10 percent tax penalty. If your qualifying student receives tax-free educational assistance (outright grants and scholarships), the amount of expenses that would otherwise qualify will be reduced by the amount of the tax-free aid. CHET Advisor is administered by the Treasurer of the State of Connecticut as the Trustee of the Connecticut Higher Education Trust Program, and Hartford Funds Management Company, LLC serves as Plan manager. 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