Question: What are the rules for withdrawing money from a 529 college-savings plan to pay for high school expenses? - E.L., Oakland, Calif.
Answer: Federal law now allows you to withdraw up to $10,000 tax-free from a 529 plan each year to pay tuition for kindergarten through 12th grade. Most states follow the federal law, but a few have different rules. California, for example, charges a 2.5% state penalty tax on earnings used for K-12 tuition. Oregon residents may have to repay any tax deduction they received for 529 plan contributions if they use the money for K-12 expenses. Check with your state and plan before making the withdrawal. See collegesavings.org for links to state plans.
As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
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