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J
jpostlw8
March 2, 2020
Question

I want to use $10,000 of 529 to repay student loan. However, my state does not consider this a qualified expense. Will I be taxed at both State & Federal Level?

  • March 2, 2020
  • 1 reply
  • 0 views
I realize I will be taxed on this distribution at State level but I am assuming the gain will still be tax free at federal level. Am I correct?

1 reply

N
NCPERSON1
March 2, 2020

when you take the 529 distribution, it will list the earning (box 2) and the return of the original investment (box 3).  Box 3 is tax free, Box 2 is not and will be federally taxed, plus 10% penalty. 

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