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In a 529 plan, how are earnings treated for federal income tax when used for qualified education costs?

Not subject to federal income tax.

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  1. Taxed at 10%
  2. Not subject to federal income tax ✔
  3. Taxed like regular wages

Why: A 529 plan is a tax-advantaged way to save for school. Earnings used for qualified education costs are free of federal income tax and often state income tax.

Huh, didn't know that: Education savings plans can also pay up to $20,000 a year per student for K to 12 tuition.

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I opened a 529 for my kids. It is a school of thought that is paying off.
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References

Answer: Not subject to federal income tax. A 529 plan is a tax-advantaged way to save for school. Earnings used for qualified education costs are free of federal income tax and often state income tax.

  1. Investor.gov: Introduction to 529 Plans www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/introduction-529-plans-investor-bulletin
    earnings in the 529 account are not subject to federal income tax and, in many cases, state income tax.
    Checked 2026-10-10.

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