Everything You Need to Know About Withdrawing 529 Funds for Back to School

It’s that time of year when kids of all ages are preparing to go back to school. And for many families, it’s your “big” kid’s turn to start their post-secondary education journey! You’ve been saving up for a while with your Edvest 529 account, and now you need to start using those funds for your student’s tuition, books, supplies, room and board, and other qualified higher education expenses.

In this article, we will go through everything you need to know about withdrawing 529 funds, including:

• Qualified, Taxable, and Non-Qualified Withdrawals
• How to Withdraw 529 Funds
• FAQs on Using 529 Funds

The process for withdrawing 529 funds is simple, and Edvest 529 is here to support you with any assistance you may need. Let’s dig in!

What are Qualified, Taxable, and Non-Qualified Withdrawals?

Withdrawals from your Edvest 529 account can fall into three categories: qualified, taxable, and non-qualified. You’ve likely heard a lot about qualified withdrawals because they can be withdrawn without federal or state income tax or penalties. These three types of withdrawals can help provide a roadmap of where to use your funds.

What is a Qualified Withdrawal?

A qualified withdrawal is any withdrawal used for approved higher education expenses. These include:

• Tuition at any eligible university in the county (and many schools abroad)
• Certain room and board expenses^*
• Fees
• Books, supplies, and equipment (such as a computer)
• Related technology, including internet access fees, software, or printers

1. ^*The beneficiary must be enrolled at least half-time at an eligible postsecondary institution. For students living in housing owned and operated by the institution, the full invoice amount will be used to determine the qualified room and board expenses. In the case of students living at home or in off-campus housing, the “cost of attendance” allowance for the individual institution will be used for the qualified room and board expenses.↩

Using your Edvest 529 funds for these costs are free from federal and Wisconsin income taxes.

What is a Taxable Withdrawal?

A taxable withdrawal will be subject to applicable state and federal income tax on earnings, if any. However, it will not be subject to the 10% additional federal tax on earnings (the “Additional Tax”).

Some examples of a taxable withdrawal include a beneficiary’s death, permanent disability, receipt of a scholarship award, or attendance at a military academy.

What is a Non-Qualified Withdrawal?

A non-qualified withdrawal is any withdrawal that does not meet the requirements of being a qualified withdrawal, taxable withdrawal, or a qualified rollover to another 529 or 529 ABLE Program account. If you use 529 funds for non-qualified expenses, your account earnings are subject to state and federal income taxation and the 10% additional federal penalty tax on account earnings (the “Additional Tax”). Just to clarify – the account earnings are the portion of your funds that have grown over time, which does not include your principal (or the funds you personally have contributed).

According to SavingForCollege, non-qualified expenses could include college examinations, application, and testing fees, or ACT/SAT prep. Expenses that aren’t directly associated with attending school, like transportation, health insurance, or miscellaneous living expenses, are also not considered a qualified expense.¹

How Do I Withdraw My 529 Funds?

With Edvest 529, you can make a withdrawal online or by mail. Most withdrawals are performed electronically, making it quick and easy to get your funds.

If you haven’t already set up an account to receive the funds for either yourself or the beneficiary, you will need to update your account information with the following details:

• Checking or savings account number
• Bank routing number
• Name as it appears on the account
• Bank’s name

You’ll also need to wait eight days after a contribution has been made into an account before withdrawing the funds. Let’s look at the steps you’ll need to take to withdraw 529 funds online.

How to Withdraw 529 Funds Online

1. Log in to your Edvest 529 account online. Once logged in, click on the “Withdraw” link on the right side of the account home page.
2. Select the type of withdrawal:
   • Qualified withdrawal
   • Qualified withdrawal for K-12 tuition expenses
   • Withdrawal for Student Loan expenses
   • Withdrawal for Apprenticeship expenses
   • Non-qualified withdrawal
3. Select where the funds will be sent:
   • Directly to the college or school – Select the state where the school is located and the school’s name, and if the funds should be sent via electronic payment or by check.
     • If electronic payment: Verify or enter the mobile phone number to receive text updates or opt-out of receiving text updates.
     • If check: Select the delivery speed, enter the college name and address, and type the student ID in the check memo field.
   • Owner – Select bank account and certify, or if by check, select the delivery speed and complete the check memo.
   • Beneficiary – Select bank account and certify, or if by check, select the delivery speed and complete the check memo.
4. For funds sent to the Owner or Beneficiary, select “Partial” or “Total” account balance withdrawal.
5. If you have multiple investment portfolios, select “Prorated Amount” or “By Specific Portfolio.”
6. Enter the withdrawal amount(s).
7. For funds sent directly to the college or school, enter the school’s required information and the Student ID of the beneficiary.
8. Verify that the withdrawal information is correct (type, delivery method, investment portfolios, and amount).
9. Select “Submit,” and you’re done!

Want more information? Check out our “Step-by-step guide on Withdrawing from Your 529 Account” video:

How to Withdraw 529 Funds By Mail

If you prefer to handle your withdrawal via mail, you must download or request the Edvest 529 Withdrawal Request Form. Find a video with step-by-step instructions on how to withdraw by mail at www.edvest.com/account/faq.

Frequently Asked Questions about Withdrawing 529 Funds

You might have some questions come up while preparing to withdraw your 529 funds. Luckily, the Edvest 529 Plan Description provides many answers and details about your account and withdrawals. But in the meantime, we have some helpful FAQs about withdrawing your 529 funds.

How quickly can you receive a withdrawal from a 529?

Typically, the process takes 3-5 days, and you will receive a check to cover the expenses you’re incurring or have already incurred.

Do 529 withdrawals need to be made in the same year expenses were incurred?

Yes. All 529 plan withdrawals must be taken in the same year the qualified expenses have been incurred. If not, the withdrawal may be taxable, and you could experience a tax penalty.

Can you withdraw from your 529 plan at any time?

Yes, you can withdraw from your 529 plan at any time. However, make sure to use your withdrawals for that year’s qualified expenses. Also, make sure you withdraw your funds at the right time to align with when you plan to use the funds.

Can you reimburse yourself from a 529?

You can reimburse yourself for qualified expenses from your 529 plan after you’ve already paid for them, as long as you withdraw the funds in the same calendar year. If you reimburse yourself for non-qualified expenses, or you will be subject to tax on that withdrawal.

How do scholarships impact 529 plan withdrawals?

If the beneficiary receives a scholarship that covers the cost of qualified expenses, you can withdraw the funds from your account up to the amount of the scholarship without incurring the 10% federal tax penalty on the earnings portion. However, the earnings portion will be subject to federal and state income tax. If the amount withdrawn exceeds the amount of the scholarship, the earnings portion of the amount withdrawn will be subject to the additional 10% federal penalty tax. Please consult with a qualified tax professional.

How much can I withdraw from my 529 plan each year for qualified expenses?

If your child is in enrolled in post-secondary education, there is no limit on the amount you can withdraw from your 529 plan. Wisconsin taxpayers may withdraw up to $10,000 tax-free annually (per beneficiary) to pay for tuition in connection with enrollment or attendance at a primary or secondary public, private or religious school. Withdrawals for K-12 tuition expenses can be withdrawn free from federal and Wisconsin income tax. If you are not a Wisconsin taxpayer, these withdrawals may include recapture of tax deduction, state income tax as well as penalties. You should talk to a qualified professional about how tax provisions affect your circumstances.

Get Ready for Back to School

Now that you know everything you need about withdrawing your Edvest 529 funds, it’s time to get your student ready to go back to school- new clothes, dorm decorations, and maybe shedding a few tears at how grown up your baby has become.

Whatever you do, you can rest assured that your student will be ready and can have everything they need with the savings you built from your 529 account.

Visit Edvest.com to get in touch or find more information.

About Edvest 529

For more than 25 years, Edvest 529 – Wisconsin’s direct-sold 529 college savings plan – has been helping families save for higher education expenses. Account owners can choose from 24 investment portfolios, access easy-to-use savings tools, and take advantage of in-state tax benefits for Wisconsin taxpayers.

Edvest 529 is a tax-advantaged investment, meaning contributions to an account may qualify for a Wisconsin state income tax deduction of up to $3,860 annually per beneficiary, per year (married couples filing separately and divorced parents may claim a maximum of $1,930). The plan has no sales charges, enrollment fees, or annual account maintenance fees. In fact, Edvest 529 is the fifth lowest-cost 529 college savings plan in the nation!²

###

To learn more about Wisconsin's Edvest 529 College Savings Plan, its investment objectives, risks, charges and expenses see the Plan Description at Edvest.com. Read it carefully. Investments in the plan are neither insured nor guaranteed and there is the risk of investment loss. Check with your home state to learn if it offers tax or other benefits such as financial aid, scholarship funds, or protection from creditors for investing in its own 529 plan. If the funds aren't used for qualified higher education expenses, a federal 10% penalty tax on earnings (as well as federal and state income taxes) may apply. Consult your legal or tax professional for tax advice. TIAA-CREF Individual & Institutional Services, LLC, Member FINRA, distributor and underwriter for the Edvest 529 College Savings Plan.

Footnotes

1. ¹Source: Saving for College, “How to Withdraw Money from Your 529 Plan,” 2023↩
2. ²ISS Market Intelligence 529 College Savings Fee Analysis 2Q 2023. Edvest’s average annual asset-based fees are 0.15% for all portfolios compared to 0.51% for all 529 plans.↩

FGN-3434578CR-Y0324W