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| *Loan,banking and credit>>>tax accounting |
What are restrictions & taxes for withdrawal of funds used to establish (i.e.,fund) a 529 college account? |
The rules for 529 account earnings are clear, however, I need clarification on what restrictions & tax implications there are on the money (i.e., principle) deposited into the account. Although your contributions aren't pre-tax (you pay state and federal tax on the money you put into the account), there are some states that let you deduct a portion of your contributions from your state taxes. If you have to withdraw the money for some reason other than to pay for qualified higher education, then you pay tax (at your rate) and a 10 percent penalty. You can only make cash contributions to the account; stocks can't be rolled over into it. Source(s): http://money.howstuffworks.com/5299.htm... 529's can get a bit tricky. The money that goes into a childs 529 plan should be treated as follows, 12k per child per year per depositor....24k per year per child IF the depositor is married. This means that mom and dad can put 24k into each of their childs 529 WITHOUT any tax implications under the "gifting" tax laws. This also means that mom can put in 12k, dad can put in 12k, auntie can put in 12k, gramma can put in 12k all in the same year. Note that the cap on 529's is usually 250k lifetime deposits. I hope this helps. Financial Professional |
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