To help families save for college, the State of Connecticut offers the Connecticut Higher Education Trust (CHET), Connecticut’s 529 College Savings Plan. Treasurer Shawn T. Wooden is Trustee of CHET. Can you choose another beneficiary? Of course, if income phase-outs prevent the taxpayer from claiming the AOTC, the $4,000 adjustment need not be made. But once you’ve entered the “529 withdrawal phase”, be sure you make the right decisions when tapping your 529 account. They also avoid the risk that the school’s financial aid office will view the payment as some sort of scholarship, and reduce the student’s financial aid package accordingly. That's huge.". As part of this process, determine if the AOTC is maximized by paying second semester college bills in December versus January. Which means it includes public and private institutions across the United States and even several abroad. Will your child go on to grad school? First, you have to include the earnings portion of the distribution as taxable income. Save any bills, receipts, and documentation for tax time. Savingforcollege.com is an unbiased, independent resource for parents and financial professionals, providing them with information and tools to understand the benefits of 529 college savings plans and how to meet the challenge of increasing college costs. If the account owner tells me they would prefer to withdraw less than the maximum amount this year so they can spread the money over the college years, I will suggest they still withdraw the maximum, and follow it up by making new contributions into the 529. IRS. Even if you’re not keen on studying the specific ins and outs of 529 withdrawals, there are a few things you need to know: Understanding what happens when you withdraw from your 529 helps you properly plan for college and your child’s future. ... such as a rollover to another state’s 529 plan or a non-qualified withdrawal. CHET ADVISOR AN ADVISOR-SOLD PLAN MANAGED BY THE HARTFORD 529 College Savings Program Connecticut Higher Education Trust. 529 plan assets are counted at different rates for the Expected Family Contribution (EFC) in the FAFSA formula. Investing involves risk including the possible loss of principal. While transportation is usually not covered, if you have special needs, your transportation needs may be covered expenses. The withdrawals from a CHET 529 plan are tax-free at both the federal and state level, as long as they're used for qualified higher education expenses. Just make sure they match up within the same calendar year. "529 Plan Advantages & Benefits," Accessed Nov. 13, 2019. You can always withdraw the money you originally invested, penalty-free. FORGOT usernameUpper. So, there would be no point in contributing and withdrawing immediately unless your state happens to have a 529 deduction. Every year the same story plays out: It’s December and an account owner has a time-sensitive withdrawal. CHET is a tax-advantaged, low cost savings program specifically designed to help families save for future college costs. Should I Use a Coverdell or 529 for My Child’s Education? If your clients’ children are heading to college soon, it’s time to start considering 529 withdrawal strategies. Start an account in 15 minutes with only $25. Because while a 529 is generally referred to as a college savings account, it can be used for other types of education besides college. Since penalties do exist for non-qualified withdrawals, fully understanding the differences between qualified and non-qualified expenses and taking steps to minimize your penalties before you withdraw will allow you to keep as much of your hard-saved investment as possible. 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