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Ohio exempts distributions from a Ohio 529 plan attributable to the beneficiary's death, disability, or receipt of a scholarship. Ohio would not require that the distributions be included in Ohio taxable income if your son were disabled.
The principal portion of nonqualified withdrawals from this plan are included in Ohio taxable income to the extent of prior Ohio tax deductions. Nonqualified withdrawals for this purpose do not include withdrawals made as the result of the beneficiary's death or disability, withdrawals made on account of the beneficiary's receipt of a scholarship, or rollovers.
The Federal tax implications are not the same.
Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. The distribution is taxable on federal but the additional 10% penalty for not using the amount for education can be excepted if the designated beneficiary is disabled. A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration.
I can not advise you on whether your son is disabled because of his diagnosis. You will need to speak with your physician regarding that.
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