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Will I be penalized if the money in my 529 plan isn't used for college expenses?

Answer:

Yes. Whether your 529 plan is a college savings plan or a prepaid tuition plan, the money you withdraw must be used for qualified higher education expenses. These expenses include tuition, fees, books, and room and board (if the beneficiary is attending school at least half-time) for college and graduate school.

If you use the money for any other purpose, the earnings portion of the distribution will be taxable on your federal (and possibly state) income tax return in the year of the distribution. Also, you generally must pay a 10% federal penalty on the earnings portion of your distribution. There are a couple of exceptions. The penalty is usually not charged if you terminate the account because your beneficiary has died or become disabled, or if you withdraw funds not needed for college because your beneficiary has received a scholarship.

Bear in mind that the "distributee" is the one subject to tax. (The distributee is the person who actually receives the money from the 529 plan.) In most situations, this will be the account owner. So, if you fund a college savings plan for your son, for example, and withdraw the money three years later (before he reaches college age), you will be the one taxed and penalized. However, some plans specify who the distributee is, while others allow the account owner to determine the recipient of a nonqualified withdrawal.

Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing. More information about 529 plans is available in each issuer's official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits.

Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent advisor.

If you are investing in a 529 plan outside of your state of residence, you may lose available state tax benefits. Make sure you understand your state tax laws to get the most from your plan.

529 plans are subject to enrollment, maintenance, administration/management fees and expenses. 529 plans are subject to fluctuation in value and market rise, including loss of principal.

Investors should consider the investment objectives, risks, charges, and expenses of 529 plans carefully before purchasing. More information about 529 plans can be found in the issuer's official statement. Please read the official statement carefully before investing.

Information provided has been prepared from sources and data we believe to be accurate, but we make no representation as to its accuracy or completeness. Data and information is provided for informational purposes only, and is not intended for solicitation or trading purposes. Please consult your tax and legal advisors regarding your individual situation. Neither AXA Equitable nor any of the data provided by AXA Equitable or its content providers, such as Broadridge Investor Communication Solutions, Inc., shall be liable for any errors or delays in the content, or for the actions taken in reliance therein. By accessing the AXA Equitable website, a user agrees to abide by the terms and conditions of the site including not redistributing the information found therein.

AXA Equitable Life Insurance Company (New York, NY) issues life insurance and annuity products. Securities offered through AXA Advisors, LLC, member FINRA, SIPC.  AXA Equitable Life and AXA Advisors are affiliated, do not provide tax or legal advice, and are not affiliated with Broadridge Investor Communicaiton Solutions, Inc..

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GE 90983 (10/2016)