For non-qualifying 529 fund withdrawals, consider the end of the calendar year. This strategy may maximize tax advantages, allowing potential
tax-free growth and optimizing the use of funds based on expenses.
If you plan to withdraw 529 funds for non-qualifying reasons, it's generally advisable to time the withdrawal strategically near the end of the calendar year. By doing so, you can maximize the tax advantages associated with the funds. Withdrawals from a 529 plan are subject to income tax and a 10% penalty on earnings if not used for qualified education expenses. By waiting until the end of the year, you allow the funds to potentially grow tax-free for a more extended period.
Additionally, if you have significant non-qualified expenses in a given year, withdrawing at year-end allows you to assess your overall financial situation and decide on the most tax-efficient way to use the funds while minimizing penalties and optimizing potential tax benefits. Always consult with a tax professional to ensure compliance with current tax laws and regulations.