I’ve Saved Money in a 529 For My Child & That Child Decided That They Won’t go to College...
I’ve saved money in a 529 for my child and that child decided that they won’t go to college, is going into the military or got a scholarship. What are my options for those saved dollars?
You can change the beneficiary on a 529 account once per year. You can make that beneficiary yourself, your spouse, or another family member.
If your child doesn’t go to college, you can withdraw all contributions you have made without tax or penalty. If you withdraw the earnings, you will pay income taxes and a 10% penalty on those dollars.
You can avoid the 10% penalty for a few reasons including:
The beneficiary becomes incapacitated.
The beneficiary decides to go into the military, receives Veterans Assistance benefits - you can then withdraw the same amount as the beneficiary receives in the assistance in that calendar year.
The beneficiary gets a scholarship or attends a U.S. Military Academy. If you are withdrawing funds because the beneficiary received a scholarship, you can withdraw the matching amount and not pay the penalty, but you will pay income tax on the earnings of the withdrawal.