Phillip99
New Member

Are non-qualified withdrawals from a 529 plan penalized on the original contributions?

My understanding is that early (nonqualified) withdrawals from a 529 plan are penalized at 10%, plus taxed over any capital gains.

Does the 10% penalty apply to capital/investment gains only, or to the cost basis (original contributions) as well?

If the 10% penalty is only imposed on capital gains, how is it determined whether the money pulled out is from the original contributions or from gains?