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I am an Enrolled Agent with 9 years of professional tax experience.
The distribution of funds 529 plans, or Qualified Tuition Plans, is not taxable as long as the funds are used by the taxpayer, the spouse, or the dependent of the taxpayer. They must be used for college expenses, which includes tuition, fees, books, supplies, and equipment. In addition, room and board can be paid with 529 distributions as long as the student is enrolled at least have time in a degree or certificate program.The distributions can not be greater than the actual qualified educational expense. If the distribution is higher than actual costs, the amount is taxable and is subject to an additional 10% tax.
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