SIE practice questionhard529 Plans
A withdrawal from a 529 college savings plan used for non-qualified expenses will result in:
- AA dollar-for-dollar tax credit
- BOrdinary income tax plus a 10% penalty on the earnings portion✓ Correct answer
- CNo federal tax consequences
- DA guaranteed education grant
Explanation
Why B — Ordinary income tax plus a 10% penalty on the earnings portion
Non-qualified withdrawals are taxed on earnings and incur a 10% penalty. Credits, guarantees, or tax-free status do not apply.
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