Federal Tax being charged on withdrawal from 529 that was used for high school tuition

Forum|Forum|2 years ago
April 16, 2023
2 replies
0 views

I withdrew $14,000 from my son's 529 in Ohio (earnings of ~$3,000 earnings and $11,000 basis). I am the recipient of the 1099-Q and paid the tuition $14,000 for him and indicated so in TT. It is charging me $365 in taxes which I assume is tax on the earnings. Is this a TT issue? These distributions should be tax free, correct?

SharonD007

No, there is not an issue with TurboTax. If your state allows it, tax-free distributions up to $10,000 from a 529 Plan can be used to pay for private primary and secondary education tuition. The tax that TurboTax calculated was for the excess distribution ($4,000). For more information, please see IRS Topic # 313 Qualified Tuition Programs (QTPs).

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

Paddy WinklerAuthor

Sounds like I screwed up with the withdrawal.

Hal_Al

Employee

$4000 / 14,000 = 28.57% of the 529 distribution was non qualified. This means that 28.57% of the box 2 amount (on the 1099-Q) is taxable. That amount is also subject to the 10% penalty. The taxable amount will be on line 8z of Schedule 1. The 10% "additional tax" (penalty) will be on form 5329.