Article Date:
February 2024


Word Count:
1388

 

 

Options for Overfunded 529 College Savings Accounts


You can accumulate federal income-tax-free earnings with a Section 529 college savings plan account.

 

Then, you can take federal-income-tax-free withdrawals to cover qualified education expenses, usually for college.

 

Great! But what if your designated account beneficiary decides not to attend college?

 

Or what if the account turns out to be overfunded, maybe because your account beneficiary got lots of scholarship money?

 

Or what if you run into financial trouble and need that money from the 529 account?

 

These things can happen! So, what are your options, and what are the federal income tax consequences for those options? Good questions. Read this for some answers.

 

Scenario 1: Account Beneficiary Will Skip College

 

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