How much is the maximum tax-free withdrawal? (I assume that the parent can wrestle the money back from the student if so desired.) How Do I Withdraw Money from the Connecticut Higher Education Trust (CHET) 529 College Savings Program? Do you have other qualified expenses coming up? They typically have three options: (1) a check made out to the account owner, (2) a check made out to the account beneficiary, or (3) a check made out to the educational institution (or jointly to the institution and the beneficiary). Connecticut Higher Education Trust Withdrawal Request Form Use this form to withdraw funds from the Program Questions? ABLE Accounts. A 529 plan can be an excellent way to save for college expenses, but beware of the penalties for non-qualified withdrawals. While there is no direct guidance from the IRS, many tax experts believe the distribution and the scholarship do not have to match up in the same calendar year when applying the penalty waiver. The Connecticut Higher Education Trust (CHET) can help you meet your goals and maximize your savings. Treasurer Shawn T. Wooden is Trustee of CHET. If the beneficiary or account owner of a 529 plan receives a refund of qualified higher education expenses from the college or university that were paid for with a 529 plan distribution, the refund can be recontributed to the 529 plan within 60 days of the date of the refund without having to pay any taxes and penalties on the distribution. If your qualifying student receives tax-free educational assistance (outright grants and scholarships), the amount of expenses that would otherwise qualify will be reduced by the amount of the tax-free aid. Planning LIFE MOMENTS. Receiving education benefits that are excludable from gross income: If you receive qualified scholarships, veterans assistance, funds from employer tuition-reimbursement plans, or other tax-free benefits, the earnings on Section 529 pla… If you take a non-qualified distribution from your 529 plan, the penalties are two-fold. However, in practice, the IRS has a nasty habit of sending out notices assessing additional taxes, interest, and penalties whenever the Form 1099-Q is sent to the account owner, as opposed to the beneficiary. This federal expansion of 529 plans affects the CHET program (Connecticut’s state-sponsored 529 plan) because it operates pursuant to federal law. We are required to file IRS Form 1099-Q annually for distributions taken from your CHET Advisor Account. Saving for college? I see the advantage here as being better control over the flow of funds. You can arrange to have the payment made to yourself, your beneficiary or an educational institution. Program Manager. Is This Myth Going to Cost You Thousands for College? About 5.5% of withdrawals for beneficiaries 16 and under were made in 2018, up 4% from 2016, according to Ascensus, which administers 529 plans for 20 states and the District of Columbia. The Connecticut Higher Education Trust is committed to keeping your personal information secure. Your 529 savings are designed for college, but some expenditures do not qualify even if they relate to your time in school or your coursework. The money that grows over time is subject to penalties, though. Withdrawals from a 529 plan that are used to pay qualified higher education expenses are completely free from federal income tax and may also be exempt from state income tax. Both tuition and fees for full and part-time students can be paid with 529 plans. The most common—post-high school education . For this reason, we may request additional information from you during log in. A non-qualified withdrawal from a Connecticut 529 plan made to the account beneficiary are exempt from state taxes. "Investor Bulletin: 10 Questions to Consider Before Opening a 529 Account," Accessed Nov. 13, 2019. Fidelity. The Connecticut Higher Education Trust (CHET) can help you meet your goals and maximize your savings. For example, let's say you have a 529 plan with $20,000 of contributions and $5,000 of earnings, for a total of $25,000. It was super easy for me to compare my client's current plan to the 529 I would recommend and show him that he can save almost $10,000 in fees over the next 14 years. The Tax Benefits of New York's 529 College Savings Program. Save any bills, receipts, and documentation for tax time. The $10,000 limit is a lifetime limit that applies to the 529 plan beneficiary and each of their siblings. Because while a 529 is generally referred to as a college savings account, it can be used for other types of education besides college. Treasurer Shawn T. Wooden is Trustee of CHET. Planning. The caveat here is that your off-campus housing costs can’t be higher than you’d pay to live on campus if you want to use 529 funds. Many plans require that the college be paid directly for education expenses; others will prepay or reimburse the beneficiary for such expenses (receipts or other proof may be required). Connecticut State Treasurer. Since penalties do exist for non-qualified withdrawals, fully understanding the differences between qualified and non-qualified expenses and taking steps to minimize your penalties before you withdraw will allow you to keep as much of your hard-saved investment as possible. Take withdrawals in the same calendar year that the qualified expenses were paid. • Complete this section to establish periodic withdrawals for your CHET Advisor sales material, see! Connecticut Higher Education Trust is committed to keeping your personal information secure Balance uses cookies to provide legal! 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