In 2014, Jennie receives $12,000 (of which $3,000 is earnings) from a Qualified Tuition Program. She uses the funds to pay for new furniture for her apartment. What amount is taxable to Jennie?

Question

Quizplus · Accepted Answer

Qualified Tuition Programs, also known as 529 plans, allow for tax-free withdrawals if the funds are used for qualified education expenses, such as tuition, fees, books, and room and board. However, using the funds for non-qualified expenses, such as new furniture, will result in the earnings portion of the withdrawal being subject to income tax and a 10% penalty. In this case, only the $3,000 earnings portion is taxable to Jennie, so the correct answer is C.

In 2014, Jennie Receives $12,000 (Of Which $3,000 Is Earnings)