Nonqualified Withdrawals
Money from a 529 plan account may be removed at any time for non-educational purposes, but the earnings will be taxed at the contributor’s ordinary income level1 and subject to a 10% penalty. Withdrawals of the contributions (the principal) will not be taxed and are not subject to the 10% penalty, because all contributions are made with after-tax dollars. All nonqualified withdrawals are assumed to be withdrawn on a