Exception to Additional Taxes on Qualified Plans (Form 5329)

b@nmdconald

Hello. Is FreeTaxUSA able to handle the circumstance in which non-qualified distributions from a 529 Plan are NOT subject to the additional tax "…because of attendance by the beneficiary at a US military academy"? How is that exception applied in the software?

JanaA

If your 529 distributions are for qualified educational expenses (including the US military academy) these distributions generally do not need to be included on your return as this is non-taxable income.

The IRS specifically states that in most cases, the beneficiary doesn't include in income any earnings distributed from a QTP if the total distribution is less than or equal to adjusted qualified higher education expenses.

For additional information, please refer to https://www.irs.gov/publications/p970