How Do I Withdraw Money from the Connecticut Higher Education Trust (CHET) 529 College Savings Program? It’s time to withdraw from your 529 Savings Plan. (See the discussion above concerning the expense adjustment for the AOTC.) Using A 529 Plan To Pay Student Loans . Yes.You must report 529 Plan distributions. You’ve saved up for your kid's college for years, and the big day is finally here. Are There Disadvantages of 529 Plans for College? CHET deduction or (2) making the deduction subject to recapture (i.e., repayment) if the CHET withdrawals are used for purposes other than paying higher education expenses. If you take a non-qualified distribution from your 529 plan, the penalties are two-fold. As of 2019, qualified expenses include tuition expenses for elementary, middle, and high schools (private, public, or religious). Of course, if income phase-outs prevent the taxpayer from claiming the AOTC, the $4,000 adjustment need not be made. non-qualified) 529 money is later withdrawn. Both tuition and fees for full and part-time students can be paid with 529 plans. • If you choose to complete Section 4, you are required to provide full legal name and date of birth. For more information, please see the December 2020 Supplement. 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. If the account owner neglects to make the $4,000 adjustment and withdraws 529 money equivalent to 100% of eligible expenses, the likely result is a $4,000 non-qualified distribution from the 529 plan. Also, remember that these expenses can be related to any educational institution that qualifies for federal financial student aid. 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. Most students are in the lowest tax brackets. Growth Potential. If your student drops a course and that puts them below half-time, that could trigger a tax penalty. In many cases, a better strategy is available that will allow you to keep more of the funds you’ve worked so hard to accumulate. Taking too much money. The Connecticut Higher Education Trust (CHET) 529 College Savings Advisor Program is only open to Connecticut state residents through a financial advisor. Say a parent takes a $10,000 distribution from a 529 plan, paid directly to then university, then the university refunds $1,500 because the student had to move out of dorm and couldn’t use the meal plan due to coronavirus. Planning LIFE MOMENTS. Box 219125, Kansas City, MO 64121-9125 Visit www.aboutCHET.com For faster processing, you can request a withdrawal online at www.aboutCHET.com. (I assume that the parent can wrestle the money back from the student if so desired.) 5 of 5. Beware of non-qualified withdrawals When you pay qualified education expenses from a 529 account, your withdrawals are tax- and penalty-free. Changes to 529 … You’ll also be subject to income taxes on the gains and may even have to pay back any state income tax deductions you previously claimed. However, you will not be taxed on the distribution as the funds were used to pay for qualifying education expenses. The Connecticut Higher Education Trust is committed to keeping your personal information secure. Would it be subject to penalty? If your clients’ children are heading to college soon, it’s time to start considering 529 withdrawal strategies. CHET Baby Scholars Program. Except for the FDIC-insured option, my529 investments aren’t guaranteed. Absolutely not. The Balance uses cookies to provide you with a great user experience. Retirement Planning Calculator. Paying for Off-Campus Housing with a 529 Plan Your student's room and board could be covered tax-free for an entire 12-month lease, even if he or … Call toll-free 1-888-799-CHET (1-888-799-2438) P.O. 3. Saving for college via 529 plans allows investments to grow, tax-deferred, until they are withdrawn for use. Only the earnings portion of a non-qualified 529 plan distribution is subject to a 10% withdrawal penalty. A non-qualified withdrawal from a Connecticut 529 plan made to the account beneficiary are exempt from state taxes. Spend It or Save It Calculator. If your child is heading to law, medical, or grad school, your 529 savings can usually be used for these expenses, too. Connecticut Higher Education Trust (CHET) PO Box 219125 Kansas City, MO 64121-9125 Connecticut Higher Education Trust (CHET) 430 W 7th Street Suite 219125 Kansas City, MO 64105-1407: With a minimum $25 dollar contribution, you can make an additional one-time payment using a personal check, Teller’s Check, Money Order or Cashier’s check. However, a recapture requirement may be difficult for the Department of Revenue Services (DRS) to enforce. Your advisor can help you develop a personalized investment strategy based on your unique financial circumstances and goals. Learn more about the types of costs 529 plans can help fund. IRS. For this reason, we may request additional information from you during log in. Fidelity. Treasurer Shawn T. Wooden is Trustee of CHET. Just don’t wait until the last day of the year to go through this exercise. Since most non-qualified withdrawals are penalized, you should only do so after carefully examining all your options. No × Log In Help. CHET is open for investment by residents in any state. Investing involves risk including the possible loss of principal. Most 529 plans let the account owners decide how they want their withdrawals to be paid out. If that happens, it is generally best to have the income reported on the student’s tax return, not the parents’. 529 plan account owners may now withdraw up to $10,000 tax-free for payments toward qualified education loans. Connecticut Higher Education Trust: To help families save for college, the State of Connecticut offers the Connecticut Higher Education Trust (CHET), Connecticut’s 529 College Savings Plan. "Investor Bulletin: 10 Questions to Consider Before Opening a 529 Account," Accessed Nov. 13, 2019. 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. No point in contributing and withdrawing immediately unless your state happens to the! 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