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Taking a withdrawal from 529 account due to scholarship

Forum|Forum|2 years ago
November 30, 2023
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I know that we can take a withdrawal from my daughter's 529 account with no penalty (taxes to be paid on earnings) to compensate for a scholarship she was awarded. My question is - does the withdrawal have to occur in the same year the scholarship was received? My daughter is a senior and I only realized we could do this earlier this year but she has received scholarships her entire four years of school. Can we take a withdrawal now without penalty for a scholarship she received in a prior year?

Best answer by Hal_Al

Q. Does the withdrawal have to occur in the same year the scholarship was received, to qualify for the penalty exception?

A. Yes.

Q. Can we take a withdrawal now without penalty for a scholarship she received in a prior year?

A. No.

For more discussion, on this topic, including an opinion that you can claim the exception, see this old thread:

https://ttlc.intuit.com/community/college-education/discussion/529-plan-withdrawals-and-prior-year-scholarships/00/825550#:~:text=To%20be%20a%20qualified%20distribution,the%20scholarship%20paid%20for%20expenses

Employee

I will page @Hal_Al

Hal_AlAnswer

Employee

Q. Does the withdrawal have to occur in the same year the scholarship was received, to qualify for the penalty exception?

A. Yes.

Q. Can we take a withdrawal now without penalty for a scholarship she received in a prior year?

A. No.

For more discussion, on this topic, including an opinion that you can claim the exception, see this old thread:

https://ttlc.intuit.com/community/college-education/discussion/529-plan-withdrawals-and-prior-year-scholarships/00/825550#:~:text=To%20be%20a%20qualified%20distribution,the%20scholarship%20paid%20for%20expenses