Preparing for CollegeAmerica® Withdrawals

Ensure a smooth start to next semester by reviewing this information before you take your withdrawal.

Learn what’s considered a qualified education expense, how to plan ahead for deadlines, and why it's important to take your withdrawal in the correct tax year.

Know What’s Qualified

Review what the IRS considers to be qualified education expenses to avoid taxes and penalties.

If withdrawals are used for purposes other than qualified education expenses, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. States take different approaches to the income tax treatment of withdrawals. For example, some may not exempt withdrawals for K–12 expenses from state tax. Please consult your tax advisor for state-specific details. 

Payment in the Correct Year

Withdrawals taken from your 529 account must match up with the payment year of qualified expenses for the exclusion to be allowed. If your payment is made in the current year for qualified expenses due in the first three months of the following year, generally the exclusion is allowed. If you have any questions, talk to your accountant or tax professional or refer to the IRS Publication 970 (PDF).

Example: You may withdraw $1,500 in December for qualified tuition expenses due for the spring semester beginning in January.

Tip: Avoid any confusion by sending the withdrawal proceeds directly to the eligible institution.

Follow these best practices to ensure your payment is made on time.

Your delivery options and tax reporting will be determined by whether the withdrawal is made payable to the account owner, beneficiary or an eligible institution.

¹To link the bank account to your American Funds account, complete the Add/Update Bank Information form (PDF).

²Expedited check delivery is available for all withdrawal options.

³The check must be payable to the owner of the account if requesting online. If the withdrawal is less than $25,000 per day, per beneficiary, the check may be payable to the beneficiary if requesting by phone or fax.

Review delivery methods and timeframes to decide which works best for you.

Note: Withdrawal proceeds are sent the next business day after the transaction's trade date.

Overnight Delivery Example: Withdrawals confirmed Monday before 4:00 p.m. ET will be sent Tuesday for arrival Wednesday.

Follow these step-by-step instructions for withdrawals to the owner, beneficiary, college or university.

1. Log in to your account. 
   Note: If you aren’t already registered, you’ll need your account number and the last 4 digits of the primary owner’s Social Security number.
2. Click Sell.
3. Enter the amount.
4. Select your payment method. 
   • Expedited check delivery is an option; however, you may need to adjust your withdrawal amount to cover the charge.
   • You can deposit to your bank account if your bank account is already linked.
   • If the beneficiary's SSN is on file, you have the option to send a check directly to the college or university. If their bank account is on file, you also have the option to deposit to their bank account.
5. Review your withdrawal.
6. To confirm your withdrawal, click Submit.