Follow individual plan instructions for making withdrawals for college expenses. Some states may require funds be distributed directly to an educational institution. Other plans may make disbursements or reimbursements directly to the account holder.
Maximize your tax-free earnings by withdrawing 529 money as needed, rather than in a lump sum. Check with your individual plan rules.
Time your withdrawals so that they occur without negative impact on your child's financial aid case. When you receive the money may also affect your eligibility for educational tax credits. Consult a financial aid or tax specialist first.
Make sure the expenses you're contemplating are eligible for 529 funds. The school must be accredited and expenses accounted for. Find guidelines by individual state plans at Saving for College online (see Resources below).
Withdraw funds for noneducational purposes according to your particular 529 account. Unless the beneficiary has died or no longer needs the money due to scholarships, you will pay a 10 percent penalty on earnings plus tax at your rate of income.
Time your withdrawal, if possible, for the best effect on your overall tax or loan status. While it might be great to have a quick influx of cash, you might also see a financial backlash. Discuss this important move with your tax consultant.