My eldest child is in college and I have already made a qualified withdrawal for their tuition bill (balance), room and board. However, our state recently changed the name of the program and sent out a new detailed booklet describing all aspects of their program to me and as I was reading it this morning, I learned that you can make a qualified withdrawal equal to any scholarship money they received and tax would only be on the earnings portion.
Logging into the state website, I can go through the motions of making a qualified withdrawal equal to the scholarship reimbursement but there isn't anything that I can find that denotes it as such. This is my first semester of doing a withdrawal so I am unfamiliar with what the state will send me in the spring for completing my taxes. If I make a withdrawal equal to the scholarship my child received ($5500), will the state send me something noting the earnings portion of that $5500 that I must pay tax on as income in the spring?
Since this child is most likely at this point going onto higher education post BS degree, I'm not even sure I am going to make the withdrawal for the scholarship reimbursement. I still need to think thing through things a bit more.
Edited: I did some additional digging and misread things a bit. Withdrawing the same amount as the scholarship is a non-qualified withdrawal but doesn't get charged the 10% penalty. You just have to pay income tax on the earnings. Thus I'm assuming the state will send out a form showing the earnings in the spring before taxes?
Logging into the state website, I can go through the motions of making a qualified withdrawal equal to the scholarship reimbursement but there isn't anything that I can find that denotes it as such. This is my first semester of doing a withdrawal so I am unfamiliar with what the state will send me in the spring for completing my taxes. If I make a withdrawal equal to the scholarship my child received ($5500), will the state send me something noting the earnings portion of that $5500 that I must pay tax on as income in the spring?
Since this child is most likely at this point going onto higher education post BS degree, I'm not even sure I am going to make the withdrawal for the scholarship reimbursement. I still need to think thing through things a bit more.
Edited: I did some additional digging and misread things a bit. Withdrawing the same amount as the scholarship is a non-qualified withdrawal but doesn't get charged the 10% penalty. You just have to pay income tax on the earnings. Thus I'm assuming the state will send out a form showing the earnings in the spring before taxes?
Statistics: Posted by lthenderson — Thu Sep 05, 2024 8:39 am — Replies 2 — Views 160
