Question for the Money Doctors
Question submitted on Apr 13, 2016.
QuestionI have money saved in 529K accounts for my children, but I'd like to cash it out and use it for private lower school now. Is there any option to rollover into another type of account and avoid penalties and taxes?
529 accounts are designed to save for future college costs. They can be rolled only into a different 529 plan or to the 529 account of a family member of the beneficiary.
Distributions from a 529 for anything other than qualified higher education expenses (college tuition, books, fees, etc.) will most likely be subject to penalties and taxes.
A Coverdell Education Savings Account, which similarly allows tax-free growth for education, does permit withdrawals for elementary and secondary school tuition fees. Taxpayers with $110,000 ($220,000 joint files) or more in modified adjusted gross income are ineligible to contribute. Total deposits for one beneficiary cannot exceed $2,000 per year.
For additional information visit http://www.360financialliteracy.org/