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Considerations before taking a distribution
Generally, qualified education expenses are expenses required for the enrollment or attendance of the beneficiary at an educational institution. For higher education expenses, the college or university must be considered an eligible institution. You can confirm whether an institution is considered eligible by using the Federal School Code Search on the FAFSA website and verifying it has a federal school code. Qualified higher education expenses include but are not limited to:
- Tuition and mandatory fees
- Required books, supplies and equipment
- Computers or peripheral equipment (printers)
To review additional qualified expenses, visit 529 qualified education expenses.
If distributions are used for purposes other than qualified education expenses, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. States take different approaches to the income tax treatment of distributions. For example, distributions for K-12 expenses may not be exempt from state tax in certain states. Consult a tax advisor for state-specific details.
Tip: Be sure to retain receipts and documentation to support that your distributions were used for qualified expenses.
Yes, as long as the new beneficiary is a member of the current beneficiary’s family. If so, the funds must be transferred to the new beneficiary first using the CollegeAmerica Account Change Request (PDF) so the distribution is reported correctly. Also, include the CollegeAmerica Distribution Request (PDF) to expedite the request. Transferring funds to someone other than a family member may result in taxes and penalties.
To ensure you qualify for tax benefits, the distribution should be made in the same calendar year as the year the qualified education expenses were paid or incurred. If money is taken out in a different year (e.g., you take a distribution in December for a tuition bill that isn't paid until March), the distribution may be considered nonqualified and subject to taxes and penalties. If you have any questions, refer to a tax advisor.
Tax reporting depends on who receives the money from the distribution. If the money is sent to:
- You (the account owner), then the tax reporting will be under your Social Security number (SSN)
- The beneficiary (student) or directly to a school, then the tax reporting will be under the beneficiary’s SSN
Consult a tax advisor to determine who should be the recipient of the money — you, the beneficiary or the school.
Form 1099-Q will be issued in January of the year following the distribution. Any earnings on distributions are exempt from federal taxes as long as you use the money for qualified education expenses.
Ready to take a 529 distribution?
Options for taking a distribution
Online
Log in to your account and click Sell to request the proceeds be sent to you by:
- Check via USPS (allow 7 to 10 business days)
- Check via expedited delivery (allow 2 business days)
- Automated Clearing House (ACH) to your bank on file (allow 1 to 3 business days)
If your bank isn’t already on file, complete the Add/Update Bank Information form (PDF). Once the request is received and processed, there is a 10-calendar-day hold before the option can be used. After it’s activated, you can use it at any time.
Phone
Contact us at (800) 421-4225.
Fax/Mail
Complete the CollegeAmerica Distribution Request (PDF). If a signature guarantee isn't required, you can submit the completed form online.
Note: Distributions payable to the account owner are reported under the account owner’s SSN.
If the distribution is for $125,000 or less:
Online
Log in to your account and click Sell to request the proceeds be sent to the beneficiary by:
- ACH to their bank on file (allow 1 to 3 business days)
If their bank isn’t already on file, complete the Add/Update Bank Information form (PDF). Once the request is received and processed, there is a 10-calendar-day hold before the option can be used. After it’s activated, you can use it at any time.
Phone
Contact us at (800) 421-4225 to process an ACH to the bank on file or to send a check to the beneficiary.
Fax/Mail
Complete the CollegeAmerica Distribution Request (PDF). If a signature guarantee isn't required, you can submit the completed form online.
If the distribution is for more than $125,000:
You must mail us the CollegeAmerica Distribution Request (PDF) with a signature guarantee.
Note: Distributions payable to the beneficiary are reported under the beneficiary’s SSN.
You’ll need the institution’s name and billing address (which could be different from the institution’s physical address) and the beneficiary’s school or student ID number. Funds can be sent to the institution only by check and cannot be transmitted electronically.
Online
Log in to your account and click Sell to request the proceeds be sent to the eligible institution by:
- Check via USPS (allow 7 to 10 business days)
- Check via expedited delivery (allow 2 business days)
Phone
Contact us at (800) 421-4225.
Fax/Mail
Complete the CollegeAmerica Distribution Request (PDF). If a signature guarantee isn't required, you can submit the completed form online.
Note: Distributions payable to the eligible institution are reported under the beneficiary’s SSN.
Ready to take a 529 distribution?
Forms you may need
CollegeAmerica Distribution Request
Request a distribution from a CollegeAmerica account.
CollegeAmerica Account Change Request
Request a transfer of ownership or name a new beneficiary or successor owner.
Add/Update Bank Information
Add or update bank information to purchase and/or sell shares.
CollegeAmerica Program Description
Get a complete guide to your 529 savings plan.