Preparing for CollegeAmerica Withdrawals | American Funds

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How to Use Your Account

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 higher 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 higher education expenses (QHEE) to avoid taxes and penalties.

Plan Ahead for Deadlines

To make sure your beneficiary and/or the eligible institution receive the money on time:

  • Be aware of factors that could create delays.
  • Review your withdrawal options and delivery timeframes below.

Payment in the Correct Year

Withdrawals taken from your 529 account must match up with the payment year of QHEE for the exclusion to be allowed. If your payment is made in the current year for QHEE 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 CollegeAmerica Account Options/Fundslink 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 or beneficiary:

  1. Log in to your account.
  2. Click Sell.
  3. Enter the amount.
  4. Select your payment method. 
    • You can deposit to your bank account if you’ve previously linked your bank account. 
    • If the beneficiary's SSN and bank account are on file, you have the option to deposit to their bank account. 
    • Expedited check delivery is an option; however, you may need to adjust your withdrawal amount to cover the charge.
  5. Review your withdrawal.
  6. To confirm your withdrawal, click Submit.

Ready to Take a 529 Withdrawal?

Sign in to your account to see how quickly you can make withdrawals and more.

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Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses, summary prospectuses and CollegeAmerica Program Description, which can be obtained from a financial professional and should be read carefully before investing. CollegeAmerica is distributed by American Funds Distributors, Inc. and sold through unaffiliated intermediaries. 

Depending on your state of residence, there may be an in-state plan that provides state tax and other state benefits, such as financial aid, scholarship funds and protection from creditors, not available through CollegeAmerica. Before investing in any state's 529 plan, investors should consult a tax advisor. 

If withdrawals from 529 plans are used for purposes other than higher education, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax.