529 Plan withdrawal

[Ming H]

I have a 529 plan that I funded myself with myself as the beneficiary. I created it to fund a higher education degree for myself. 

My school has been including a scholarship on the statement as a deduction from the initial amount.

Considering the scholarship exception, am I allowed to withdraw the amount equal to what is shown from my  529 plan without the 10% penalty? But I will have taxes on this amount correct?

I also have tuition assistance from my employer, which covers a portion of the tuition up to the maximum $5,250 tax free amount. My total tuition exceeds that amount, so I am assuming the additional out of pocket I have to pay for tuition is additionally tax free?

[Critter-3]

All the qualified education expenses paid from a 529 plan are tax & penalty  free. 

[Hal_Al]

Q. Considering the scholarship exception, am I allowed to withdraw the amount equal to what is shown from my  529 plan without the 10% penalty?

A. Simple answer: yes.  Tax free employer assistance also counts for the scholarship exception. 

Q. But I will have taxes on this amount correct?

A. Simple answer yes

Q. I also have tuition assistance from my employer, which covers a portion of the tuition up to the maximum $5,250 tax free amount. My total tuition exceeds that amount, so I am assuming the additional out of pocket I have to pay for tuition is additionally tax free?

A. Simple answer:  yes. But it depends on what you mean by "Tax free". Out of pocket $ are eligible for the tuition credit  or tax free 529 distributions.  Tuition claimed for a tuition credit also counts as a penalty exception for the 529 distribution. 

But your situation is  a little unclear.  Basically, you cannot "double dip" on tax benefits. The same tuition cannot be covered by scholarship, tax free employer assistance and 529 distributions and claimed for a tuition credit. 

Provide the following info for more specific help:

• Box 1 of the 1098-T
• box 5 of the 1098-T
• Any other scholarships not shown in box 5
• Does box 5 include any of the 529 plan payments (it should not)
• Does box 5 include any of the employer assistance (it should not, but sometime is)
• Is any of the Scholarship restricted; i.e. it must be used for tuition
• Box 1 of the 1099-Q (529 plan distribution)
• Box 2 of the 1099-Q
• Are you a half time or more student
• Room & board paid. If student lives off campus, what is school's R&B charge. 529 distributions can pay for R&B [if half time or more], but scholarships cannot
• Other qualified expenses not included in box 1 of the 1098-T, e.g. books & computers
• Are you trying to claim the tuition credit (are you eligible)?
• Is the student an undergrad or grad student?
• Did you get the full $5250 from your employer, if not how much did you get
• Did you get employer assistance above $5250. Was the excess included in your W-2 (it should have been)