Scholarship and 529 plan

@sfc_bboswell wrote:

You basically have three options:

1. Earmark the 529 funds for some future use by that child, perhaps for
   graduate school.
2. Direct it to another family member, such as a
   current sibling or a future grandchild. You can make the change in
   beneficiary anytime before the second family member actually goes to
   college.
3. Withdraw the extra funds. The earnings in your account will
   be subject to income tax either on your return or your child’s.
   Normally, there would be a a 10% additional federal tax on the
   earnings portion as well, which is penalty for taking a nonqualified
   withdrawal, but the penalty is waived when scholarships are the
   reason for it. In effect, the scholarships have turned your tax-free
   529 investment into a tax-deferred 529 investment.

Brian Boswell
VP, Research & Development

This information does not constitute tax advice and is provided for informational purposes only. Please consult your tax advisor, financial advisor, local taxing authority, and/or plan provider or sponsor for more information.

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