How much can you withdraw from a 529 plan?

An annual withdrawal limit of $10,000 is applied to 529 plans for K-12 tuition expenses. If you’re using 529 plan funds to pay student loan debt, there is a lifetime withdrawal limit of $10,000. No matter how much you withdraw, you have to use the money for qualified educational expenses to avoid paying income tax and a 10% penalty. 2.

Are 529 Withdrawals tax-free?

While a 529 plan is broadly the same across the U.S., specific rules may differ in each state’s plan. So it’s critical that you follow the rules, especially around withdrawals. But the rules have changed in the last few years, expanding when you can take tax-free withdrawals.

What happens if you withdraw money from a 529 plan?

When withdrawing from a 529 plan, you’ll have to disclose whether you’re using the funds for qualified educational expenses or unqualified expenses. If you withdraw funds for an unqualified expense, you’ll incur a 10% penalty and then have to report those funds as income on your state and federal taxes.