How to Withdraw Money From an Education Savings Account

To withdraw money from an education savings account, log in to your 529 or Coverdell plan, request a distribution for the amount of qualified expenses you’re paying, choose whether the money goes to you, the student, or the school, and take the distribution in the same calendar year you pay the bill. Do that, keep the receipts, and the withdrawal is tax-free. Miss on any of those pieces and the earnings portion can be taxed and hit with a 10% federal penalty.

What You Need Before You Start

Most plans process withdrawals through an online portal. Have these ready:

Your account login and account number
The beneficiary’s Social Security number
The dollar amount, based on the current semester’s billing statement
The beneficiary’s student ID number, if you’re paying the school directly
Your bank routing and account numbers, if funds are going to your personal account

Figure out the dollar amount before you click through. Add up tuition, required fees, and any other qualifying costs for the term, then subtract any tax-free scholarships and education tax credits (such as the American Opportunity Credit) that already covered part of the bill.¹ What’s left is the amount you can pull tax-free. Withdrawing more than that turns the excess earnings into taxable income.

Submitting the Request

Online, look for the Withdrawals or Distributions section of your plan’s dashboard. Confirm the pre-filled account details, enter the amount, choose the payee, and submit with an electronic signature. Save the confirmation.

If your plan requires a paper form, download it from the plan’s website and mail it to the address listed. Large withdrawals (some plans set the threshold around $25,000) may require a Medallion Signature Guarantee, which means visiting a bank to have a certified officer verify your identity. Certified mail with a return receipt gives you proof of submission.

Electronic transfers usually arrive within three to five business days. Paper checks take longer.

Who Should Receive the Payment

Most plans let you send the money to yourself as account owner, to the student, or directly to the school. The choice matters for tax reporting. When the student or the school is the payee, the plan reports the distribution under the student’s Social Security number and mails the Form 1099-Q to the student’s address. When you’re the payee, it’s reported under your Social Security number.²

Sending the funds straight to the school is often the cleanest option. The payment goes on the student’s balance, and there’s less room to accidentally spend the money on something that doesn’t qualify.

Match the Withdrawal to the Same Calendar Year as the Expense

Take the distribution in the same calendar year you pay the expense. If you pay a spring semester tuition bill in January 2026, withdraw in 2026. If the IRS sees a distribution year that doesn’t line up with the expense year, it can treat the money as non-qualified and impose tax plus the 10% penalty on the earnings.

The classic trap is a December tuition bill for a January semester. If the school charges you in December and you pay it in December, take the 529 withdrawal in December too. Waiting until January to pull the money leaves a 2026 distribution with no matching 2026 expense.

What Counts as a Qualified Expense

A 529 distribution is tax-free only when spent on expenses the IRS considers qualified.³ The core list:

Tuition and mandatory fees at an eligible college, university, or vocational school
Room and board, if the student is enrolled at least half-time. On-campus, the school’s charge is the cap. Off-campus, rent and food qualify only up to the school’s published cost-of-attendance allowance for room and board.¹
Required books, supplies, and equipment
A computer, printer, educational software, and internet service, as long as the beneficiary uses them during years of enrollment. Gaming consoles and entertainment equipment don’t qualify.³
K–12 tuition, up to $10,000 per year per student. This cap covers tuition only, not other K–12 costs.¹
Fees, books, supplies, and equipment for an apprenticeship registered with the U.S. Department of Labor⁴
Student loan repayment, up to a $10,000 lifetime limit per individual. The cap applies across all 529 accounts combined, and each sibling has their own separate $10,000 limit.¹

Coverdell ESAs cover the same postsecondary expenses as 529 plans but reach further into K–12. For elementary and secondary students, Coverdell funds can also go toward tutoring, uniforms, transportation, room and board (when the school requires or provides it), and services like extended-day programs.⁵

One boundary specific to Coverdells: any balance still in the account must be distributed within 30 days after the beneficiary turns 30, or the IRS treats the balance as automatically distributed, taxing the earnings and applying the 10% penalty.⁶ Beneficiaries with special needs are not subject to the age limit. To avoid a forced distribution, roll the balance into a Coverdell for a younger family member before the deadline.

After the Money Arrives

By January 31 of the year after the withdrawal, the plan administrator sends Form 1099-Q to whoever received the funds.² It breaks the distribution into three pieces: the gross amount, the earnings portion, and the basis (your original contributions). When the whole distribution went to qualified expenses, you generally owe nothing on it, but you still need to keep tuition bills, receipts, and records showing where the money went. The IRS can request them in an audit.

If the School Refunds Part of the Tuition

If the student drops a class or withdraws and the school refunds money you already paid with 529 funds, you have 60 days from the refund date to recontribute that amount to any 529 account for the same beneficiary.⁷ Stay within the refunded amount and the 60-day window, and the original distribution stays qualified. The recontribution is treated as basis and doesn’t count against contribution limits. Miss the window and the refunded portion becomes a non-qualified distribution, with tax and possible penalty on the earnings.

What a Non-Qualified Withdrawal Costs

Pull more than your adjusted qualified expenses and the earnings portion of the excess is taxed as ordinary income and hit with an additional 10% federal tax.⁶ Your original contributions come back to you tax-free, since you paid income tax on that money before depositing it.

The 10% penalty is waived in a few situations:

Scholarship offset. If the student receives a tax-free scholarship, you can withdraw up to the scholarship amount without the 10% penalty. Income tax on the earnings still applies.⁶
Disability or death of the beneficiary.
Attendance at a U.S. military academy, up to the cost of education the academy covers.

State tax may also come back around. If you claimed a state income tax deduction for your contributions, many states require you to add that deduction back to state taxable income when you take a non-qualified withdrawal. The mechanics vary by state.

Options Better Than a Non-Qualified Withdrawal

If the money isn’t needed for the current student, two moves keep it tax-advantaged.

Change the beneficiary. You can switch the 529’s beneficiary to another qualifying family member without tax or penalty. Qualifying relatives include a spouse, child, sibling, parent, grandparent, niece, nephew, in-law, or first cousin of the original beneficiary. The funds keep growing tax-free for someone else’s education.

Roll leftover 529 funds to a Roth IRA. Starting in 2024, unused 529 balances can be rolled into a Roth IRA for the 529 beneficiary, subject to these rules:⁸

The 529 account must have been open for more than 15 years.
Contributions (and earnings on them) made within the last five years can’t be rolled.
The annual rollover amount can’t exceed the Roth IRA annual contribution limit, which is $7,500 for 2026 ($8,600 if the beneficiary is 50 or older).⁹
Total lifetime rollovers to a Roth IRA can’t exceed $35,000 per beneficiary.
The transfer must go directly from 529 trustee to Roth IRA trustee.

Standard Roth IRA income limits don’t apply to this rollover. Rollover amounts do count against the beneficiary’s overall Roth contribution limit for the year, so if they also make regular Roth contributions, the combined total can’t exceed the annual cap.

1
Office of the Law Revision Counsel. 26 USC 529 – Qualified Tuition Programs
2
Internal Revenue Service. Instructions for Form 1099-Q (04/2025)
3
Internal Revenue Service. 529 Plans: Questions and Answers
4
Internal Revenue Service. Topic No. 313, Qualified Tuition Programs (QTPs)
5
Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
6
Office of the Law Revision Counsel. 26 USC 530 – Coverdell Education Savings Accounts
7
IRS.gov. Guidance on Recontributions, Rollovers and Qualified Higher Education Expenses Under Section 529 Notice 2018-58
8
Internal Revenue Service. Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs)
9
Internal Revenue Service. Retirement Topics – IRA Contribution Limits