Jack Woods


Central Business Solutions 

301 Lynnfield Street, P.O. Box 3169 Peabody, MA 01960


Phone:  978-532-0266

Fax:      978-532-9105


1147 Main Street, Suite 213, P.O. Box 299 Tewksbury, MA 01876


Phone: 978-851-8044

Fax:     978-851-9332


Email: jack@cbps.com

November 2020

November 2020 Client Profile

Client Profile

Seth paid for his college tuition using funds from a 529 college savings plan. He received a partial refund for a course he dropped. Will he have to pay tax on this refund?

If possible, Seth should return the refund to his 529 plan within 60 days and it won’t be taxable. However, if he misses the 60-day window,
it gets complicated and the refund may be taxable. He may also owe a 10% penalty for failing to use 529 funds for qualified expenses unless he meets one of several exceptions. Taxability largely depends on whether Seth received any tax-free educational help from things like scholarships, veteran’s benefits, Pell grants or employer provided assistance that offset his qualified education expenses.

Seth should also look for other qualified expenses he incurred. If he bought a laptop and pays for internet service to use for distance learning, these qualify and can be used to offset the refund.

Client Profile is based on a hypothetical situation. The solutions we discuss may or may not be appropriate for you.


Enter your Name and Email address to get
the newsletter delivered to your inbox every month.


Enter your Name, Email Address and a short message. We'll respond to you as soon as possible.

The information and opinions contained in this web site are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for any damages resulting from the use of the published information. This web site is published with the understanding that it does not render legal, accounting, financial, or other professional advice. Whole or partial reproduction of this web site is forbidden without the written permission of the publisher.