My son has graduated college and I'm fortunate enough to have a 529 surplus. I'm interested in withdrawing the balance of the account but want to make sure I understand the tax implications first. It's my understanding the earnings portion will count as ordinary income with an additional 10% penalty. For example, if the earnings portion is $40K then that amount is included with my other income to calculate my tax liability. Once that number is known, an additional $4K (10% of $40K) is added to determine my total tax liability. Is my thinking correct?
Thanks
Gary
