What is a 529 plan?

A state 529 plan is a college savings plan named for the section of the Internal Revenue Code (Section 529) that defines these types of plans. Under this code, you contribute after-tax money and your money grows tax-free, and all withdrawals are tax-free, when used for tuition, room and board, or other qualified higher education expenses.

There are two types of state 529 plans: college savings plans and prepaid tuition plans. The difference lies in who chooses the investments and who assumes the risks.

• College savings plan (WA529 Invest): You pick your investments and shoulder the investment risk. The value of your account is based on the performance of your investments. When it's time for college, you have whatever money is in your account.
• Prepaid tuition plan (GET): You prepay for college tuition today for use in the future. The value of your account is guaranteed by the state to keep pace with resident undergraduate tuition and state-mandated fees at the most expensive Washington public university. The state chooses the investments and assumes all the investment risks.

Most states now have either a 529 college savings plan or a 529 prepaid college tuition plan, or both. Washington’s prepaid 529 plan is called GET Prepaid Tuition. Washington's college savings plan, WA529 Invest, opened in 2018 with the name DreamAhead.

Accounts in both types of plans receive favorable treatment for financial aid purposes by federal law. If the parent is the account owner, the account is considered an asset of the parent in determining a family's eligibility for federal financial aid. It is treated by the financial aid formula at a much lower rate than student savings.

To learn more about 529 plans, visit the College Savings Plans Network website.

Can I use a 529 account to pay for apprenticeship programs?

On December 20, 2019, a federal spending bill 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.

To find an apprenticeship or see if the one you’re interested in is accredited, visit Apprenticeship USA's search tool. 

Can I use a 529 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 GET is primarily designed to save for qualified higher education expenses at post secondary schools. Please consult a tax advisor. 

I got an email about the SECURE Act. What does it mean?

On December 20, 2019, the President signed the SECURE Act into law, as part of the Further Consolidated Appropriations Act, 2020 (Act). This bill pertains mostly to changes with retirement accounts, but it also includes new provisions that allow 529 Plan account owners to withdraw assets to pay for certain apprenticeship programs, and to pay principal and interest on qualified higher education loans for the beneficiary or any of the beneficiary’s siblings.
For a detailed explanation on how these provisions may affect how you can use your GET or WA529 Invest account, visit here. 

Under the SECURE Act, will I have to pay taxes on 529 reimbursements for student loans or apprenticeships?

The SECURE Act states that the withdrawals described above will not be considered taxable distributions by the IRS. As always, we encourage account owners to consult a qualified tax advisor about these new developments and how they relate to their personal situation.

Can I request up to $10,000 to apply to student loans every year under the SECURE Act ?

No. The SECURE Act allows a lifetime maximum of $10,000 to be reimbursed from 529 accounts to pay existing student loans. For example, if you claim $5,000 in student loan reimbursements from your 529 account in 2019, you have only $5,000 remaining for this purpose in subsequent years, until you reach the $10,000 lifetime maximum.

Can I get reimbursed under the SECURE Act for student loan payments that were made for another child or myself (the Account Owner)?

Yes, if the student beneficiary has a sibling you won’t have to make any changes to your account. You will just submit the reimbursement request as normal.
If you would like to use the GET account for your own student loan payments you will have to change the name of the student beneficiary to you. Once this change is processed you can submit a reimbursement request.

What kind of school loan can I get reimbursed for under the SECURE Act? 

The SECURE Act states “amounts paid as principal or interest on any qualified student loan” are eligible for reimbursement from a 529 account. Please consult a tax advisor.

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. 
Learn more >

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 do I roll a 529 account into a Roth IRA?

Find the necessary forms for rolling your GET or WA529 Invest account into a Roth IRA can be found on our Forms pages. 
GET forms
WA529 Invest forms

How much can I roll over 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 >

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 >

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 >

How do account changes such as account owner transfers, beneficiary changes, or rollovers between 529 plans made in the last 15 years impact eligibility for a 529-to-Roth rollover? 

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 >

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 >

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 >

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 >

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 >

What are the state and federal tax advantages of a 529 plan? 

The money in a 529 account 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 to a 529 plan 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 WA529 Invest 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. 

Why am I receiving a 1099-Q form? What should I do with it?

A 1099-Q form is a record of funds distributed from a qualified tuition program (QTP or 529 plan) to an account owner, student beneficiary, or designated school. As a QTP, the GET Program is required by federal law to report this information to you. As a GET account owner or student beneficiary, you may receive a 1099-Q form if one of the following occurred in the previous tax year:

• We sent a refund check to the account owner or to the student (check recipient will receive the 1099-Q);
• We sent a reimbursement check to the account owner or to the student (check recipient will receive the 1099-Q);
• We paid the student’s school directly (student will receive the 1099-Q); or
• We sent a direct rollover to another 529 plan on your behalf (account owner will receive the 1099-Q). Note: in this case, you will see a checkmark in Box 4: “Trustee-to-trustee transfer.”

Do I need to report the information on a 1099-Q on my taxes? 

According to the IRS: “Earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary, such as tuition, fees, books, as well as room and board.”

Additionally, according to IRS Publication 970: “The part of a distribution representing the amount paid or contributed to a QTP doesn't have to be included in income. This is a return of the investment in the plan. The designated beneficiary generally doesn't have to include in income any earnings distributed from a QTP if the total distribution is less than or equal to adjusted qualified education expenses.”

Also, “Any amount distributed from a Qualified Tuition Plan (QTP) isn't taxable if it is rolled over to another QTP for the benefit of the same beneficiary or for the benefit of a member of the beneficiary's family (including the beneficiary's spouse). An amount is rolled over if it is paid to another QTP within 60 days after the date of the distribution. Don't report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. These aren't taxable distributions.”

Please consult a tax professional for details about your situation. We also encourage you to review the following resources:

• IRS Instructions for Form 1099-Q >
• IRS 529 Plans: Questions and Answers >
• IRS Publication 970: Tax Benefits for Education >

What are qualified higher education expenses?

These include the tuition, fees, books, computer technology, supplies, and equipment required for enrollment or attendance at an eligible college, university or other educational institution. They may also include some room and board costs. For details, review this summary and consult Chapter 8 of IRS Publication 970 Tax Benefits for Education, available on the IRS website.

What do the numbers on the 1099-Q form mean?

• Box 1 shows the total funds distributed from your GET account.
• Box 2 shows earnings that could be subject to taxation if you didn’t use them for qualified education expenses as required by federal law.
• Box 3 shows the portion of the distributed funds that was paid (contributed) into your GET account. This equals the difference between Box 1 and Box 2.

When could the earnings in Box 2 be taxable?

The earnings could be taxable under the following circumstances:

• If any portion of the distributed funds were not used for qualified education expenses or were not rolled over into another QTP within 60 days for the same student beneficiary.
• The student beneficiary was changed to someone who is not an eligible family member of the original student beneficiary.

Other circumstances may apply. Consult a tax professional for more information.