Q. 24% x $37.5=$9000. So I don't know why Turbo Tax is saying I owe 12K in federal taxes.
A. 9000 + (0.10 x $37,500) = About $12K. so that's the most likely explanation.
You may (probably) not qualify for the exception, because of timing. The consensus is that you (or your parents) should have withdrawn the 529 money in each the years you attended the academy, in order to qualify for the exception. That's my reading of Pub 970, but it's not explicit. The TT interview also seems to take that attitude. But there is disagreement on the every year part, but, even then, most still say the distribution must be done before graduation.
In order to get TurboTax (TT) to apply the military academy exception, to the penalty, you have to indicate you attended school/academy, in 2021, in the 1099-Q interview. If you have desktop software (not online), you can use the forms mode.
