529 Withdrawals and Taxes - Ways to use your Education Plan

[@StevenBrener]

If you take out $x and go into non-qualified territory by a few thousand, how would you know how much of that is basis and how much earnings?

[@chrisdime]

My understanding is that it's all proportional. First find out the meta-level basis vs total balance, this is the percentage of any withdrawal that would be tax free. You can determine your basis by either calling that investment custodian OR adding up total contributions into that account. For illustration purposes, let's say 50% of the account is basis and 50% is earnings. Then the "few thousand" that is attributable to a non-qualified distribution would be multiplied by the percentage we determined earlier (ie 50% tax free, as well as 50% income taxable + penalty taxable). Does that help answer your question? Here is an article from "The Tax Advisor" that walks one through an example calculation -> www.thetaxadviser.com/issues/2021/jul/taxation-qualified-tuition-plan-contributions-distributions.html *as always i am not a CPA and would of course recommend seeking the guidance of a tax professional