When it’s time to use your savings
Whether your child has chosen to attend a university or a trade school, locally or out of state, we have the information you need to help you to take a distribution quickly and securely from your Franklin Templeton 529 account.
Request a withdrawal whenever you are ready.
Complete the process in five easy steps:
1. Log in to your account
2. Select a beneficiary’s account
3. Select “Make a Distribution”
4. Enter amount and payment method
5. Submit the request
Your money, your way.
Every family's situation is unique, and you have options to withdraw your money in the way that works best for you.
What’s covered when it’s time to withdrawal?
Earnings on your 529 investments are free from tax when used for qualified education expenses.
- Tuition and fees
- Books, supplies and equipment
- Room and board1
- Computers, equipment, software and internet access
Additional qualified expenses include:2
- Up to $20,000 per year can be used for expenses at private, public, and religious K-12 schools.
- Career credentialing/technical programs
- Certain certified apprenticeship expenses
- Up to $10,000 can be applied towards the principal or interest of a student loan for the beneficiary or a sibling.
Learn more about withdrawals
Does my child have to attend college in New Jersey?
No. You can use the assets in your account at any eligible school in the country and abroad. That includes 2- and 4-year colleges, graduate schools, eligible apprenticeships, and vocational/technical schools.
How are withdrawals reported to the IRS?
You or the student will receive IRS Form 1099-Q in the first quarter, if you made a withdrawal the previous year. Note: If you received the money, then you get the form. If the child or school received the money, the child will get the form.
This form will show gross distributions, earnings, and principal. If any of the earnings are considered taxable (not used for qualified expenses), they should be reported on Form 1040 as part of a federal income tax return. Be sure to keep records of all qualified expenses.
How do I prove that my withdrawal is for qualified expenses?
You should keep records of all qualified expenses, such as receipts, bills, and canceled checks. While you don't need to submit these to the 529 plan provider, you may need them for your own tax records or in case of an audit.
Are there any penalties for non-qualified withdrawals?
Yes, non-qualified withdrawals are subject to federal income tax and a 10% penalty on the earnings portion of the withdrawal. However, there are some exceptions, such as if the beneficiary receives a scholarship or attends a U.S. military academy.
Footnotes:
- The beneficiary must be enrolled at least half-time. The amount you can withdraw for room and board is limited to the cost of attendance as determined by the school or the actual amount charged if the student is living in school-owned housing.
- Qualified education expenses and eligible institutions are defined by federal law and are subject to change. K–12 tuition distributions are limited to up to $20,000 per beneficiary per year. State tax treatment of K–12 distributions may differ from federal tax treatment. Student loan repayment distributions are limited to a lifetime maximum of $10,000 per beneficiary or their sibling. Roth IRA rollovers are subject to a $35,000 lifetime limit, account age requirements, annual Roth IRA contribution limits, and other federal requirements. Earnings on distributions used for non-qualified expenses may be subject to federal and state taxes and an additional tax. Consult your tax advisor regarding your specific situation.
All investments involve risk including possible loss of principal.
Investors should carefully consider the 529 plan’s investment goals, risks, charges and expenses before investing. To obtain the Program Description, which contains this and other information, talk to your financial professional or call Franklin Distributors, LLC, the manager and underwriter for the 529 plan at (800) DIAL BEN/342-5236 or visit franklintempleton.com. You should read the Program Description carefully before investing and consider whether your, or the beneficiary’s, home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in its qualified tuition program.
Franklin Templeton’s 529 College Savings Plan is offered and administered by the New Jersey Higher Education Student Assistance Authority (HESAA); managed and distributed by Franklin Distributors, LLC, an affiliate of Franklin Resources, Inc.,
which operates as Franklin Templeton.
Investments in Franklin Templeton’s 529 College Savings Plan are not insured by the FDIC or any other government agency and are not deposits or other obligations of any depository institution. Investments are not guaranteed by the State of New Jersey, Franklin Templeton, or its affiliates and are subject to risks, including loss of principal amount invested. Investing in the plan does not guarantee admission to any particular primary, secondary school or college, or sufficient funds for primary, secondary school or college.
This material is being provided for general informational and educational purposes and should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel and provided for educational and informational purposes only. Franklin Templeton does not provide legal or tax advice. Federal and state laws and regulations are complex and subject to change, which can materially impact your results. Franklin Templeton cannot guarantee that such information is accurate, complete or timely; and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.