How to make withdrawals | NY 529 Direct Plan (2023)

Time to pay the monthly fee? Here's what you should know about withdrawing yourstraight planAccount.

Connected

1. Log in to your account.
2. Outside ofmy bills, select the relevant account you want to trade for.
3. On the Overview page, select from Investmentsmake a withdrawal.

4. Choose one of the following options:

   • Yup. This is a qualifying deduction for college expenses;or

   • Yup. This is an outlay to pay fees, books, supplies, and/or equipment required to participate in a Department of Labor registered and certified learning program;or

   • no This is an ineligible payment and will not be used for educational expenses.

   • Yup. This is an outflow for payment of tuition related to enrollment or attendance at public, private or denominational primary or secondary school;or

   • Yup. This is a withdrawal to pay principal or interest on a qualifying educational loan by the beneficiary or a beneficiary's sibling.

     (Video) 529 Plan Withdrawal Timing Must Match Qualified Expenses

5. If you are withdrawing funds to pay primary or secondary school fees or to make repayments of qualifying educational loans, please note that for New York State tax purposes, this requires the recovery of any New York State tax benefits accrued in contributions.

6. Submit your request.

Observation:Remember to include the beneficiary's student ID number in the memo section if your payment is going directly to the college or other post-secondary school. However, please note that enrollment cancellations for grades K-12 cannot be sent directly to the beneficiary or educational institution. We only send K-12 tuition payments to the account holder.*

By American mail

1. Download and print our cancellation form.

2. Complete all sections of the form, signing where indicated.

   Observation:If the outlay is for the college or other post-secondary school, enter the recipient's student ID in Section 3 of the form and write it in the "Memo" section of your check.

3. Send your completed form to:

   New York College 529 Savings Programstraight plan
   Mailbox 55440
   Boston, MA 02205-8323

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over the phone

If the outlay is for the college or other post-secondary school, you must provide your account, beneficiary, and school information, as well as the beneficiary's student ID number.

Phone call877-NYSAVES (877-697-2837).

Important information

Please allow ten business days (possibly plus shipping time) for the money to arrive.

You should also allow for additional processing time during periods of high volume as there may be a delay in posting to the student's school account.

If you intend to add or change bank information, please allow a 15 calendar day review period during which no assets can be sent to the bank.

More about payments

What can I use the money for?

Generally, there are two types of payments: qualified and non-qualified payments.

Qualified payments.A qualifying payment is used to pay:

• qualifying higher education expenses at an eligible educational institution, such as
  • Tuition fees, fees, books, supplies and equipment necessary for registration or participation,
  • certain accommodation and subsistence expenses during periods of study in which the beneficiary is enrolled for at least half a day,
  • certain expenses for students with special needs,
  • Expenses for the purchase of computers or certain computer-controlled peripherals (eg printers); Internet access and related services; and certain computer software if the equipment, software or service is intended to be used primarily by the beneficiary during enrollment,
• Tuition expenses related to enrollment or attendance at a public, private, or religious elementary or high school (K-12 tuition) of up to $10,000 per year per beneficiary*,
• Expenditure on fees, books, materials and equipment necessary for a beneficiary to participate in a training program registered and certified by the Ministry of Labor (training costs)*, or
• Principal or interest on federally qualified education loans of the beneficiary or a beneficiary's sibling up to a lifetime limit of $10,000 per person (Eligible Education Loan Payments)*.

Distributions made to pay K-12 tuition or qualifying educational loan repayments are considered ineligible withdrawals for New York State tax purposes and require recovery of all tax benefits accrued on contributions.

Ineligible payments.An unqualified withdrawal is anything but:

• Qualified revocation,
• waiver due to death or disability of the beneficiary,
• Withdrawal due to receipt of a qualifying subsidy by the beneficiary (provided the amount withdrawn does not exceed the subsidy amount),
• Switching to a 529 plan not offered by the State of New York pursuant to Section 529 of the Internal Revenue Code, or
• Transfer of assets to another beneficiary under a 529 plan offered by the State of New York (provided the new beneficiary is a family member of the original beneficiary).

Transfers to ABLE Plans.Account holders may also transfer plan assets to ABLE plan accounts pursuant to Federal Law 529 through December 31, 2025, subject to the annual ABLE plan contribution limit. Transfers of 529 plan assets to ABLE plan accounts are not taxable events for federal or New York State tax purposes. For more details about theDirect PlansYou can consult the tax advantages in the disclosure booklet and in the student savings contract.

Do I pay tax on my withdrawals?

federal taxes.You are not required to pay federal income tax on distributions from your account when funds are used for eligible expenses.

Income from unqualified withdrawals is treated as income and is subject to federal and state taxes, including an additional 10% federal penalty in most cases. Ineligible withdrawals may also be subject to state and local taxes.

Waivers due to the death or disability of a beneficiary or receipt of a grant are subject to ordinary income tax but are not subject to the 10% federal tax penalty.

New York State Taxes.You are not required to pay New York State income tax on distributions from your account if the funds are used to pay for eligible higher education expenses at eligible educational institutions or educational costs. However, distributions made to pay K-12 tuition or qualifying educational loan repayments are considered ineligible withdrawals for New York State tax purposes and require recovery of all tax benefits accrued on contributions. Taxes and other benefits are subject to meeting other requirements, and certain withdrawals are subject to federal, state and local taxes. Consult a tax professional regarding state income taxes if you are not a New York State taxpayer.

How much should I withdraw for qualifying expenses?

When calculating your needs, be sure to deduct any allowances or allowances from the amount you intend to withdraw.

Also, consider whether you intend to claim federal tax credits such as the American Opportunity Tax Credit or the Lifetime Learning Credit. If you apply for a credit, the amount of your spend that counts as eligible will be reduced.

Observation:Any excess amount you withdraw will be considered an ineligible withdrawal.

Who can receive payment?

All eligible higher education payments may be sent by check to the account holder, payee, or eligible educational institution. If your account has wire transfers set up, payments can be sent electronically.

Application cancellations for grades K-12 cannot be sent directly to the beneficiary or school. We only send K-12 tuition payments to the account holder.

All other withdrawals can be sent to the account holder or payee.

How are withdrawals reported to the IRS?

You or the student will receive the Form 1099-Q from the IRS in late January or early February if you made a withdrawal in the previous year. (When you receive the money, you will receive the form. When the student or school receives the money, the student will receive the form.)

This form shows gross, income and capital distributions. If any income is considered taxable, it must be reported on Form 1040 as part of a federal income tax return. Be sure to keep records of all eligible expenses.

Learn more about withdrawals in the FAQ: Managing your account