The funds you put into the plan should not be taxed when withdrawn. The earnings could be subject to tax and penalties if the funds are not used for qualified expenses.
The good news is that you do have a few options. The Tax Cuts and Jobs Act (TCJA) of 2017 made a significant change that may benefit your son. Limited amounts can be rolled over from a 529 plan to an ABLE account. Funds from an ABLE account can help designated beneficiaries pay for qualified disability expenses.
Another option, available since January 2024 under the Secure Act 2.0, is that unused funds, up to $35,000, from a 529 plan can be rolled over into a Roth IRA in the beneficiary’s name.
Here is a link to an article I wrote for the Intuit Accountant’s Tax Pro Center that will provide additional information on 529 plans.
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