529 Plan Loss
November 22nd, 2007
Question: If I have loss in my 529 Plan, do I pay penalty if I withdraw for non-educational purpose?
I have loss (not earning) in my 529 Plan. Do I pay penalty if I withdraw now for non-educational purpose? Also do i get tax loss deduction?
Answer: Per Kiplinger you will taxed and pay a penalty on any earnings. “If you withdraw the money for any reason other than to pay for educational expenses, then you’ll be taxed on the earnings — generally at your income-tax rate (although sometimes at the child’s rate, depending on the state) — and will owe a penalty of 10% of your earnings. Some states have additional penalties, too. If you had taken a state income-tax deduction for your contribution, you may also have to pay it back.”
See IRS Publication 970 Tax Benefits for Education for more information about the tax rules and penalties. (2nd link)
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Tags: 529 plan loss, 529 plan loss deduction, 529 plan losses tax deductible, break, college, finance, investing, taxes