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General
What is the DreamAhead plan?
The DreamAhead College Investment Plan is a 529 plan created by the state of Washington to help everyone in the U.S. save for higher qualified expenses. Accounts can be easily managed online and used to pay for tuition at an elementary or secondary public, private or religious school, and qualified higher education expenses at eligible schools all over the U.S. and overseas. DreamAhead provides a wide range of investment options and tools to help you save with the support of friends and family through gift contributions.
Who is Sumday?
Vestwell State Savings, LLC (formerly Sumday) is the plan manager for the DreamAhead College Investment Plan. It provides investment management services, recordkeeping, online investing platform, and U.S.-based customer service. For more information, check out the Program Details Booklet.
Opening an Account
Who can open a DreamAhead account?
All U.S. persons (citizens and legal residents) over the age of majority* (unless a Custodian or Legal Guardian is named for a minor) with a Social Security Number or Taxpayer Identification Number can open an account for either themselves or for a beneficiary. You do not need to be a Washington State resident to have a DreamAhead account.
*The age of majority is based on your state of residence. For most states it is 18, with the following exceptions: Alabama (19), Mississippi (21), Nebraska (19).
What do I need to open a DreamAhead account?
It only takes $25 to open an account and invest for the future. To get started, you’ll need your email and the information below for yourself, the beneficiary, and the successor owner (optional, but suggested):
- Name
- Home address
- Phone number
- Date of birth
- Social Security Number
To set up the account, you will need:
- To choose your investment(s)
- Your bank account number and routing number
- To make an initial $25 contribution to the account
Do I have to live in the state of Washington to open a DreamAhead account?
No, all U.S. persons (citizens and legal residents) over the age of majority* with a Social Security Number or Taxpayer Identification Number can open an account for either themselves or for a beneficiary.
*The age of majority is based on your state of residence. For most states it is 18, with the following exceptions: Alabama (19), Mississippi (21), Nebraska (19).
Who is the account owner of a DreamAhead?
The account owner is generally the person who opens the account. They own and manage the account for as long as they are the account owner. At any point, the account owner can add or change the beneficiary, change the account owner to someone else, or choose a successor owner to take over the account if something were to happen to them. A beneficiary can also be an account owner. If the account owner is a minor you must also name an account custodian.
What are the fees associated with a DreamAhead account?
There are fees to keep each account up and running smoothly:
- Annual maintenance fee of $30 which is billed quarterly (an $7.50 service fee will appear on your account each quarter)
- Asset management fees applied to your portfolio(s): between 0.254% to 0.330% of all investment assets (these fees happen in the background and won't appear in your activity feed)
Additional service-based fees are applied as follows:
- Rollovers / Transfers out of plan: $25
- ACH fail / Returned checks: $25
- Statement delivery, per account, per year: $10
- Paper check disbursement: $2.50
- Overnight check or statements delivery: $15
- To reissue checks: $15
- Outgoing wires: $15
- Requests for paper historical statements and postage incurred, if required: $10
Is there a minimum to open a DreamAhead account?
It only takes an initial $25 contribution to open an account and start saving. There is no enrollment fee.
Can I open more than one DreamAhead account?
Yes, you can open accounts for any number of beneficiaries, including yourself. Keep in mind that the combined total contribution of all the accounts for the same beneficiary cannot exceed the $500,000 limit. The $500,000 limit also applies on a combined basis if you also save with GET.
How do I change my info, like contact details, password, investments with DreamAhead?
It’s easy to make changes online by signing in to your account.
- To make changes to your address, password or email, sign in and go to your Profile.
- To change the beneficiary, successor owner or other account information, navigate to your account and click the Settings tab.
- For investments changes, go to the Investments tab to make updates.
If you don’t have an online account, you can send in a form requesting changes to your account.
If you need additional help, you can always contact customer service.
Who is the successor owner of a DreamAhead account?
If you become legally incapacitated or die, your successor owner would take over all your rights, title and interest in the account. You can designate a successor owner during enrollment or at a later date. If you are familiar with the GET program, the term ‘successor owner’ has the same meaning as ‘account owner survivor.’
Who can access a DreamAhead account?
Only the account owner can sign in to their account with their email and password. For security reasons, don’t share your password or let someone else access your account.
If you want to provide inquiry-only access for your DreamAhead account to your Financial Advisor, please complete the Authorization for Information Release form.
Beneficiary
Who can be a beneficiary of a DreamAhead account?
A beneficiary can be your child, your grandchild, yourself, or any U.S. person with a Social Security Number or Tax Payer ID. The account owner and beneficiary can be the same person. An account can be transferred to another beneficiary, as long as they are considered an eligible member of the family of the original beneficiary.
Can a beneficiary have more than one DreamAhead account?
Yes, a beneficiary can be named on multiple accounts. Family and friends can open an account for a beneficiary or contribute to an existing account by making a gift contribution.
Keep in mind that the total contributions to all 529 savings accounts (DreamAhead and GET programs) in Washington State with the same beneficiary can’t go over the maximum contribution limit of $500,000. The balances are aggregated to monitor the maximum contribution limitation.
Can I transfer a DreamAhead account to another beneficiary?
Yes, you can change the beneficiary of an account by using the Change Beneficiary form as long as the new beneficiary qualifies as a "member of the family." Changing the beneficiary does not count toward your one-time rollover limit (in a 12-month period) or twice per calendar year investment change.
Who qualifies as a "member of the family" for a DreamAhead account?
A “member of the family” is someone related to the beneficiary as follows:
- a son or daughter or a descendant of either
- a stepson or stepdaughter or a descendant of either
- a brother, sister, stepbrother or stepsister
- the father or mother or an ancestor of either
- a stepfather or stepmother
- a son or daughter of a brother or sister
- a brother or sister of the father or mother
- a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law
- the spouse of the beneficiary or of any of the other foregoing individuals
- a first cousin of the beneficiary.
For this purpose, a child includes a legally adopted child or a foster child and a brother or sister includes a half-brother or half-sister.
What happens to a DreamAhead account if the beneficiary doesn’t go to college?
If the beneficiary decides that college is not in the future, you have three options:
You can stay invested. Your beneficiary may decide to attend school. There is no age limit for using the money in your account.
You can change your beneficiary to an eligible member of the original beneficiary’s family.
You can withdraw your money for other uses. A 10% federal penalty tax on earnings will apply if you withdraw money for any reason other than to pay for qualified expenses. Exceptions to this penalty include a withdrawal made because the beneficiary:
- Has died or become disabled.
- Received a scholarship to an eligible education institution, to the extent the withdrawal amount doesn't exceed the scholarship amount.
- Has enrolled in an eligible U.S. service academy, to the extent that the amount of the withdrawal doesn't exceed the value of the education. Eligible academies include the U.S. Military Academy, Naval Academy, Air Force Academy, Coast Guard Academy, and Merchant Marine Academy.
Additionally, any accumulated earnings that are withdrawn from your account must also be reported on the recipient's income tax return for the year in which they're distributed, and you may owe federal, state, and local income taxes.
Contact your tax advisor to determine how to report withdrawals for other uses.
What happens to a DreamAhead account if a beneficiary is awarded a scholarship?
If your beneficiary receives a scholarship, you can make a withdrawal equal to the amount of the scholarship. Any earnings are subject to federal and applicable state and local income taxes, but are not subject to the additional 10% federal penalty tax, so long as the distribution does not exceed the scholarship amount.
How will having a DreamAhead account affect my financial aid?
If the parent or dependent student is the Account Owner, a DreamAhead account is considered an asset of the parent and treated more favorably than assets of a non-dependent student when determining eligibility for financial aid. Distributions from DreamAhead accounts owned by non-parents may be treated as student income the following year and have greater impact. You may want to consult your financial advisor or the financial aid office at your school.
Can I add multiple beneficiaries to a DreamAhead account?
No, each account can only have one beneficiary. You can open a separate account for a new beneficiary or change the beneficiary on an account at any time.
Adding to an Account
How does a DreamAhead account work?
When you open and set up an account online, it is securely connected to your bank account so you can easily make transfers of at least $5. You can make contributions, set up automatic monthly contributions, or make withdrawals for qualified expenses whenever you want; they usually take between 2–7 days to complete. The money you add will be invested based on the investment option(s) you choose.
How do I make contributions to a DreamAhead account?
With an online account, you can make contributions at any time or set up monthly transfers of at least $5 with your connected bank account(s).
Checks are also welcome. You can fill out a Contribution form and make your check payable to DreamAhead College Investment Plan. Then mail the contribution form and check to:
DreamAhead College Investment Plan
PO Box 534421
Pittsburgh, PA 15253-4421
Please write your DreamAhead College Investment Plan account number in the memo line of the check.
If you would like to make a gift contribution to someone’s account, you can use the Gift form.
Are there any contribution limits to a DreamAhead?
There’s a $25 minimum to open an account and start saving. After that, all transactions (contributions, withdrawals, and monthly bank transfers) must be at least $5 per investment portfolio. Contributions are limited to $15,000 per transaction online. To contribute more than this please use a Contribution form.
There’s also maximum account balance limit of $500,000. Once your account balance reaches $500,000, you will not be permitted to make additional contributions unless your account balance falls below $500,000. Once at the $500,000 limit, your account can continue to grow past the $500,000 limit through investment earnings. The $500,000 limit applies on a combined basis if you also save with GET (Guaranteed Education Tuition). For example: if you save $86,000 with GET, you can contribute up to $414,000 with DreamAhead.
Can employment earnings be deposited into my DreamAhead account through payroll direct deposit?
Yes! Complete the setup process in three simple steps:
- Log in to your DreamAhead account and click on “Direct Deposit Settings” on the Total Balance tile
- Enter your information and retrieve your direct deposit details — including a unique routing and account numbers
- Provide your account details to your employer to complete the set up
Can I contribute a refund from an eligible educational institution into my DreamAhead account?
Yes, you can make a re-contribution by using the Contribution form if the refund is from an eligible educational institution and it was originally used by the beneficiary to cover a qualified expense.
The re-contribution must be made within 60 days of receiving the refund and the amount must not exceed the refund amount.
Once the re-contribution is complete, it will not be considered as gross income for federal tax purposes; however, the original distribution will be reported on your 1099-Q federal tax form.
Linking Bank Accounts
Can I connect a bank account to my DreamAhead Account?
Yes, we've made it even easier to access and manage funds by allowing you to securely log in and connect bank accounts.
Setting it up is easy. Log into your DreamAhead Account, go to the "Settings" tab and click on the "Add a new bank" button. Follow the steps to link a new bank account. You can securely connect a bank via Plaid or manually add a bank account. If you manually add a bank account, you will have to upload a voided check or statement.
Keep in mind that you won’t immediately be able to withdraw money using a newly added bank account. There is a 5-day withdrawal hold on banks added via Plaid and a 10-day withdrawal hold on manually added bank accounts.
Can I connect more than one bank account or type of account to my DreamAhead Account?
Yes, you can connect more than one bank account as well as multiple types of bank accounts. Each account and type will need to be connected individually, but you can have both savings and checking accounts linked to your DreamAhead account at one time. The DreamAhead Account Owner/Custodian or Beneficiary must own the bank account connected to the DreamAhead account.
Investments
Where can I learn about the Investment Options for a DreamAhead account?
You can read more about each investment option on the Investment Options page.
What are my investment options with DreamAhead?
There are plenty of options to choose from when it comes to saving for college. You can choose between Year of Enrollment or Static Portfolios, or a mix of both. Learn about each one before you make a decision.
- Year of Enrollment portfolios use the beneficiary’s approximate year of enrollment in college to automatically adjust fund allocations over time. This means that the closer the beneficiary gets to the year of enrollment, the more conservative the portfolio’s allocation will become. Each Year of Enrollment portfolio can be customized to your risk tolerance.
Compare Year of Enrollment portfolios
- Static portfolios allow you to invest in specific funds based on your risk tolerance. Static investments don’t change allocations on their own, so it’s a good idea to review your selection over time.
Compare Static portfolios
- Adding to multiple portfolios is ideal for more advanced investors or for those who want to have more control over their investments. This option allows you to contribute to any combination of the Year of Enrollment and/or Static portfolios. For example, if a beneficiary plans on attending undergraduate and graduate school, you could contribute to two different Year of Enrollment portfolios to maximize the time before they enroll in each school.
Can I change my investment selection with DreamAhead?
Yes. You may change your Investment Options up to two times per calendar year.
There are two ways to adjust and/or change how your money is invested:
- You can sell your portfolio and use the money to purchase a new one. This will be considered an investment change and you can only do this up to twice a year. You can do this online or use an Investment Change form.
or
- You can keep your previous portfolio/s, but decide to put future contributions in a new investment option. This allows you to make adjustments over time without selling any portfolios. Please note, this does not count toward your twice per year limit on investment changes. You can do this online or use a Contribution form.
If you are invested in a Year of Enrollment Portfolio, the automatic reallocation of assets within the Year of Enrollment Portfolio based on the age of your beneficiary is not considered one of your twice per calendar year investment changes.
Using an Account
How can I use a DreamAhead account?
Opening a DreamAhead account lets you save money with tax-free growth and withdrawals when you use your funds for qualified expenses.
What is considered a qualified expense?
Most costs related to a beneficiary’s higher education qualify as an eligible expense. These include Qualified Higher Education Expenses (QHEE) as defined by the IRS:
- Tuition and fees at eligible educational institutions
- Books and software
- Supplies and equipment (e.g. computers, internet, printers, etc.)
- Certain room and board expenses
Federal law also considers student loans (up to $10,000 lifetime), certain apprenticeship programs, and tuition at an elementary or secondary public, private or religious school (up to $10,000 annually) a qualified expense.
Qualified withdrawals are tax-free so long as the total withdrawals for the year don’t exceed a beneficiary’s adjusted QHEE.
At what types of schools can I use DreamAhead?
You can use your DreamAhead account at nearly any public or private college, university or technical school in the United States and at selected colleges in other countries. A college is eligible if it participates in federal financial aid programs through the U.S. Department of Education. You can also use your 529 account to pay for eligible apprenticeship programs. To look for registered apprenticeship programs, The Department of Labor provides a search tool. Tuition (up to $10,000 annually) at elementary and secondary public, private, and religious schools is also considered a qualified expense.
How do I withdraw money from DreamAhead?
It’s easy to make withdrawals from your account online. You can withdraw as little as $5 each time and transfer money into any bank account linked to your DreamAhead account. If you have more than one investment, you can also decide from which investment you’d like to pull money.
If you want to send a check or electronic payment directly to your school, you can download and complete a Withdrawal form (PDF) or request the payment online by logging in to your DreamAhead account. Vestwell charges a $2.50 fee for check withdrawals and a $10 fee for electronic payment withdrawals.
Note, any money withdrawn from your account should be used for qualified expenses.*
*Earnings on non-qualified withdrawals are subject to federal income tax and may be subject to a 10% federal penalty tax, as well as any applicable state and local income taxes. Payments from a 529 account for K-12 education are limited to $10,000 annually and may result in tax implications. The availability of tax or other benefits may be contingent on meeting other requirements.
Can I make direct payments from my account to my school with DreamAhead?
Yes. You can have payments directly made out to any eligible educational institution to pay a bill or tuition online, or by using our Withdrawal form.
Can I use my GET or DreamAhead account to pay for room and board expenses?
Yes, money from the account can be used to pay for room and board during the academic period the beneficiary is enrolled at an eligible educational institution (postsecondary schools only). Keep in mind that the amount must be within the allowed Cost of Attendance (COA).
Can I use my account to pay for computers, tablets, and other study tools?
As long as they are used by the beneficiary for educational purposes during the time of enrollment at an eligible educational institution (postsecondary schools only), they are considered qualified expenses.
Can I use the money for international schools?
Yes, if they are 529 eligible institutions and recognized by the U.S. Department of Education. You can double check your school here. Costs associated with some study abroad programs through U.S.-based higher education institutions may also qualify. If you are using the funds in your account to pay for eligible elementary and secondary tuition, the state law will determine whether international schools are included. Please consult your tax advisor.
Can I use a DreamAhead account for K-12 expenses?
Section 529 of the IRS code allows for tax-free distributions for tuition (up to $10,000 annually) at elementary and secondary public, private, and religious schools. Please note that DreamAhead investment options are specifically designed to save for qualified expenses at postsecondary schools. Please consult a tax advisor.
Can I use the money from my DreamAhead account and Coverdell Education Savings Account (ESA) to pay for expenses in the same year?
Yes, you can use money from both accounts for different qualified expenses. You can learn more about this in IRS Publication 970.
Is paying off a student loan a qualified expense?
On December 20, 2019, a federal spending bill was signed containing provisions allowing 529 plan account owners to withdraw assets to pay principal and interest on certain qualified education loans for the beneficiary of your account or any of the beneficiary’s siblings. The loan repayment provisions apply to repayments up to $10,000 per individual. This $10,000 is a lifetime amount, not an annual limit.
Can I use my account to pay for apprenticeship programs?
On December 20, 2019, a federal spending bill called the Secure Act was signed containing provisions allowing 529 plan account owners to withdraw assets to pay for certain expenses associated with apprenticeship programs registered and certified by the Secretary of Labor under the National Apprenticeship Act..
What if a college sends me a refund for my DreamAhead account?
College students and parents who receive refunds for tuition, room and board, or other qualified expenses can re-contribute their refund back into their DreamAhead Account within 60 days of the date of the refund to avoid paying any penalty or taxes on the earnings. Be sure to check IRS Publication 970 to see how a refund may be treated under the law.
How do electronic payments to schools work when using DreamAhead?
Vestwell, our DreamAhead program manager, uses Flywire’s disbursement technology to automatically send electronic transactions to any school that connects to the disbursement solution. Payments are delivered via ACH to the school’s bank account on record and schools will receive notification with relevant details, such as payment amount, student full name, student ID number, and the 529 plan name.
Can I cancel an electronic payment transaction to a school from my DreamAhead account?
Payments can be canceled by 12:50 p.m. Pacific Time on the day you make your payment request. If Flywire has already processed your request, or your school has already received your funds, you cannot cancel your payment.
How do I request a refund to my DreamAhead account for an electronic payment to a school?
Once a payment is processed, refunds must be requested directly from your school. As the payee, they must decide whether to grant your refund request.
What happens if an electronic payment from my DreamAhead account is sent to a school by accident?
The payment will be reversed, the funds returned, and the money will be allocated back to the original account.
Are there any restrictions on making a withdrawal from my DreamAhead account?
In some cases, there are restrictions on how soon you can access the funds in your DreamAhead account. You may not request a withdrawal of funds immediately after adding them to your DreamAhead account. If a contribution is made by check, EFT, or Automated Investment Plan (AIP) assuming all are in good order, the approval of a distribution of that contribution from the account will be deferred for five (5) business days after the deposit. For gift contributions, the hold period is ten (10) business days.
Please note that there will be a hold placed on distribution requests for thirty-five (35) calendar days after any of the following occur:
- you complete an initial enrollment in DreamAhead;
- you change your banking information; or
- you change your address.
Additional contribution hold times:
- when you manually add a bank account: ten (10) calendar days
- when you add a bank account via Plaid: five (5) calendar days
- when you submit a change of address: fifteen (15) calendar days
For assistance, please contact a DreamAhead customer service representative at 844.529.5845.
Gifting
How does gifting work with a DreamAhead account?
Friends and family can make gift contributions to help a beneficiary’s account grow. Once a Gifting Page is set up for a DreamAhead account, you will receive a custom link when it’s live. You can follow the instructions online to make a direct contribution of at least $5 to a beneficiary’s account.
Online gifting is limited to $15,000 per transaction. If you want to contribute more than that amount, you can fill out a Gift form. Simply include a check of at least $5 when you mail the form and give the detachable gift receipt to the beneficiary for their records.
For more details visit our How to give a gift page.
What are the federal estate and gift tax benefits?
People making gift contributions might benefit from an annual federal gift tax exclusion of $18,000 per donor ($36,000 for married contributors) by reducing the taxable value of an estate. Any additional contributions can be treated up to $90,000 (or $180,000 for joint filers) as having been made over a period of up to five years for federal gift tax exclusion.*
* In the event the donor does not survive the 5-year period, a prorated amount will revert back to the donor's taxable estate.
How can friends and family help a beneficiary save for college with DreamAhead?
Anyone can open an account for a beneficiary by signing up online or they can make a gift contribution online or by using the Gift form.
Rollovers
Can I roll over assets from another 529 college savings plan into my DreamAhead account?
You can roll over funds from another 529 plan account into your DreamAhead account for the same beneficiary without federal income tax consequences (including the 10% federal penalty tax) if you do so after 12 months from the date of a previous rollover for the same beneficiary to any 529 plan.
You may also roll over money from another 529 plan account into your account without federal income tax consequences at any time when you change beneficiaries, provided that the new beneficiary is a member of the family of the old Beneficiary.
To start a rollover, open a new DreamAhead account, then initiate a rollover to DreamAhead from your online account found in the Using Units tab. If you prefer paper you can fill out the Rollover form or learn how to start a GET rollover.
How do I roll over a GET account into a DreamAhead account?
You must first open your new DreamAhead account.
Once you have your DreamAhead account number, you simply sign in to your online GET profile and find the 'Using Units' tab to start the rollover process into a DreamAhead account. For more details about the GET rollover process, check out the GET Rollovers page.
You must roll over the entire balance of the GET account into the new DreamAhead account. All the information about the account and beneficiary will be matched seamlessly to an existing DreamAhead account.
The rollover is all managed online, without having to fill out paper forms. A rollover from your GET account to a DreamAhead account is considered a rollover for purposes of the once per 12-month rollover limitation.
Can I contribute funds from a Coverdell Education Savings Account (ESA) to a DreamAhead account?
Yes, you can use the Rollover form to indicate which assets were liquidated from an Education Savings Account (Coverdell ESA). Unlike UGMA/UTMA accounts, the Beneficiary may be changed to a Member of the Family of the beneficiary of an ESA. Making distributions from an ESA to fund an account for the same beneficiary is not a taxable transaction. Consult your tax advisor for more information.
Can I transfer assets from a UGMA/UTMA account to my DreamAhead account?
Yes, you can use the Rollover form to get started or if you have a GET account you can do it online. You should consult a qualified tax advisor with respect to the contribution of UGMA/UTMA custodial assets and the implications of such a contribution.
Do not use this form to roll over a Guaranteed Education Tuition (GET) program account to DreamAhead. To learn more about how to initiate a GET to DreamAhead rollover, visit the GET Rollovers page.
What is the Uniform Gifts to Minors Act (UGMA)?
The Uniform Gifts to Minors Act and the Uniform Transfer to Minors Act (UTMA) allow minors to own assets (like stocks, bonds, mutual funds, annuities, or insurance policies) without an attorney needing to set up a special trust fund.
Can I roll over assets from my DreamAhead account into another college savings plan?
You can roll over part of or all of the DreamAhead account’s funds into a new 529 college savings plan by filling out a rollover form from the new 529 plan. Keep in mind that once liquidated, your DreamAhead account will remain open unless you decide to close it.
You can make one rollover per 12-month period without being taxed.
Please note, there is a $25 rollover fee.
Roth IRA Rollovers
Can I make a tax-free rollover from a 529 account to a Roth IRA?
Yes. The rollover must be to a Roth IRA account in the name of the 529 plan beneficiary, not the 529 account owner/participant. In addition, the 529 plan account must have been open for a minimum of 15 years prior to the rollover. It is our understanding that 529 plan accounts opened within 15 years of the potential rollover date will not qualify as a tax-free rollover. Learn more on our Secure 2.0 information page.
Important Note: A 529-to-Roth IRA rollover may have tax consequences. The 529 Plan Participant / Account Owner and 529 Plan Account Designated Beneficiary / Roth IRA Owner are solely responsible for complying with all relevant IRS Rules, including any Guidance released by the IRS in the future. You should speak with a qualified tax professional before making a 529-to-Roth IRA Rollover.
How much can I rollover from a 529 account to a Roth IRA tax-free?
Rollover amounts are subject to the annual contribution limits applicable to Roth IRAs. These limits are set by the IRS and may change annually. Any funds that are rolled over will decrease the amount you can contribute from other sources in that tax year. Consult a financial and/or tax advisor to make sure you are within annual limits. Additionally, it is our understanding that there is a lifetime limit per beneficiary of $35,000 for tax-free 529 to Roth IRA rollovers. Learn more on our Secure 2.0 information page.
Which funds can be rolled over into a Roth IRA tax-free?
It is our understanding that funds contributed to the 529 plan more than five years before the requested rollover date (and the earnings on those contributions) can be rolled over tax-free. Learn more on our Secure 2.0 information page.
Do existing IRA compensation requirements apply to the 529 beneficiary when making a 529-to-Roth IRA rollover?
The Beneficiary/Roth IRA owner is best suited to determine eligibility in consultation with their financial or tax advisor(s). Learn more on our Secure 2.0 information page.
How do any account changes such as account owner transfers, beneficiary changes, or rollovers between 529 plans made in the last 15 years impact eligibility?
This rule has yet to be confirmed by the IRS. You should speak with a qualified tax professional prior to making a 529-to-Roth IRA Rollover. Learn more on our Secure 2.0 information page.
Can I make a tax-free rollover from a 529 account to a Roth IRA for the prior year?
This rule has yet to be confirmed by the IRS – you should speak with a qualified tax professional prior to making such an election. Learn more on our Secure 2.0 information page.
Can I roll from my 529 account into my state-sponsored Auto-IRA?
The Beneficiary/Roth IRA owner is best suited to determine eligibility in consultation with their financial or tax advisor(s). Learn more on our Secure 2.0 information page.
How do I roll a 529 account into a Roth IRA?
The necessary forms for rolling your GET or DreamAhead account into a Roth IRA can be found on our Forms page. Learn more on our Secure 2.0 information page.
Can I take a distribution from my 529 account, cash the check, and then make a check payable to my Roth IRA Custodian?
No. It is our understanding that for the rollover to be tax-free, you must request a direct Trustee-to-Trustee transfer. That means you cannot take possession of the funds. You tell us who the IRA Custodian will be, and we’ll make the check payable to them. Learn more on our Secure 2.0 information page.
What if my state doesn’t conform to the federal rule for 529-to-Roth rollovers?
There are some states that have indicated that they are nonconforming, meaning they may have state-level restrictions different than, or in addition to the federal rules. You should speak with a qualified tax professional prior to making a 529-to-Roth IRA Rollover in a non-conforming state. Learn more on our Secure 2.0 information page.
Tax Benefits
What are the state and federal tax advantages with DreamAhead?
The money in a DreamAhead grows tax-deferred and withdrawals are tax-free when used for qualified expenses. There are no state tax benefits in the state of Washington.
Are contributions federal tax deductible?
No, contributions to a 529 plan are not deductible on your federal taxes.
How are withdrawals for non-qualified expenses taxed?
A 10% federal penalty tax on earnings will apply if you withdraw money for any reason other than to pay for qualified expenses. Exceptions to this penalty include a withdrawal made because the beneficiary:
- Has died or become disabled.
- Received a scholarship to an eligible education institution, to the extent the withdrawal amount doesn't exceed the scholarship amount.
- Has enrolled in an eligible U.S. service academy, to the extent that the amount of the withdrawal doesn't exceed the value of the education. Eligible academies include the U.S. Military Academy, Naval Academy, Air Force Academy, Coast Guard Academy, and Merchant Marine Academy.
Additionally, any accumulated earnings that are withdrawn from your account must also be reported on the recipient's income tax return for the year in which they're distributed, and you may owe federal, state, and local income taxes.
Contact your tax advisor to determine how to report withdrawals for other uses.
What are some non-qualified expenses that are not penalized?
There are certain instances when non-qualified higher education expenses are not penalized. This could happen when a beneficiary inherits a 529 plan, becomes permanently disabled or dies, receives a tax-free scholarship, or attends a U.S. service academy. You will still owe income taxes on the earnings, but there will be no additional 10% penalty.
Are contributions made pre-tax or after-tax?
Contributions are always made after-tax.
Is there a state income tax deduction?
There is no state income tax deduction for the state of Washington.
Can I claim a HOPE/American Opportunity Credit or a Lifetime Learning Credit for qualified tuition and other related expenses?
If a beneficiary or parent is eligible, they can apply for a Hope Scholarship Credit or Lifetime Learning Credit for certain qualified expenses. There are certain restrictions that don’t allow you to claim a credit for the same qualified expenses used to figure the tax-free portion of a withdrawal from your DreamAhead account. Learn more in IRS Publication 970.
What is IRS Form 1099-Q?
If you make a withdrawal from your account, you will receive IRS Form 1099-Q, which details all of the withdrawals you made throughout the tax year from your account. The recipient of the Form 1099-Q will either be the account owner or the beneficiary, depending upon the tax responsible party you elected during the redemption process. Withdrawals sent to an eligible educational institution will be reported under the beneficiary's Social Security number (or taxpayer identification number), per IRS guidelines.
To ensure that you properly handle matters on your federal income tax return, please consult a tax advisor and learn more about Form 1099-Q from the IRS directly.
When is IRS form 1099-Q available?
The plan administrator must send the 1099-Q by January 31. You should receive the form no later than early February following the close of the tax year. You will receive it via mail or electronic delivery based on communications preferences.
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