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Level 1
December 22, 2021

Disability withdrawals - 529 plan

  • December 22, 2021
  • 1 reply
  • 6 views
Hello:
 
I have some questions about the 529 plan. 
 
1) If I become permanently disabled, can I withdraw the principal only tax free (similar to a roth IRA where principal withdrawals are not taxed)? 
 
2) If a disability withdrawal is taxed, is the entire withdrawal taxed or only the earnings?
 
3) Is the disability withdrawal subject to both state and federal taxes?
 
Thank You
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    1 reply

    qbteachmt
    Level 15
    December 22, 2021

    Which tax preparation program are you using for this client's tax return?

    Are you using your tax preparer lesson materials? Are you using the IRS resources? Are you using the Web, such as:

    https://www.kiplinger.com/article/college/t002-c001-s001-529-plan-when-disabled-child-can-t-attend-college.html

     

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