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Posted by / 24-Aug-2017 00:25

For example, if the state's limit is 0,000, you can't contribute more than 0,000.

On the other hand, a college savings plan limits the value of the account for a beneficiary.

At one time, this meant five years of tuition, fees, and room and board at the costliest college under the plan, pursuant to the federal government's "safe harbor" guideline.

Taxes May Not Be an Issue The use of funds in a 529 plan is only a concern if the account value at the time of the withdrawal exceeds the amount contributed.

If not, the money can be withdrawn at any time with no taxes or penalties and used for any purpose.

However, if you withdraw all or a portion of the earnings early, before college expenses arise, then you will have to pay ordinary income taxes on the earnings.

In addition, you will have to pay a 10-percent tax penalty on the funds.

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This generally includes almost all two- and four-year institutions in the U. You can check if a particular school is eligible by visiting .