When taking a distribution from the 529 plan for my son (for non-qualified expenses) in an amount equivalent to his earned scholarship, why do I need to pay taxes on the deduction if I used after-tax dollars when contributing to the 529 plan?
I understand that there is no 10% penalty for this deduction, and I that I should pay taxes on the earnings I have accrued on this investment, but not sure if/how just the earnings portion vs. the full amount of the withdrawal amount is taxed. Is this something I have to estimate or track on my own, based on when my contributions were made, etc.?
Appreciate any help or guidance that can be provided.
