Hello, I am currently the beneficiary of a 529 account that contains $5000 left after my education. I am looking to withdrawal the $5000 and use it for a non-educational expense. I understand that this will take a 10% fee and income tax when declaring it on my 1099-Q, but I am still lost on a few things. I will have been unemployed for all of 2025 and will not qualify for an income tax bracket, so what will the income tax % be on this $5000? Also, when filing on the 1099-Q, will I file the non-educational withdrawal and usage of the funds under earnings or basis? Thank you!
Posted by Artemisc16
1 Comment
The 1099-Q is not something you fill out yourself. The 529 provider fills it out and sends it to you, which you then use to prepare your income tax return (Form 1040).
All 529 withdrawals are a proportional mixture of contributions (basis) and earnings. Only the earnings are subject to income tax + 10% penalty. The basis is not taxed or penalized.
If you have no other income, then it could be that you won’t owe any ordinary income tax and would just owe the 10% penalty on the earnings portion of the withdrawal. But if anyone can claim you as a dependent, then it’s possible that you might owe some income tax because your standard deduction would be lower than the usual $15k that applies to non-dependents.