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Yes. If the distribution exceeds education expenses, a portion will be
taxable to the beneficiary and will be subject to a 10% tax penalty. Exceptions to the
penalty include death, disability or if the beneficiary receives a qualified scholarship.
Here is a link from IRS:
IRS TAX TIP 2003-38 COVERDELL EDUCATION SAVINGS ACCOUNTS
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‎June 28, 2023
1:13 PM