Non-qualified withdrawals

If you withdraw money from a 529 account and don’t use it to pay for qualified education expenses of the designated beneficiary, the recipient of the money must add all amounts withdrawn to their Idaho taxable income (if not included in federal adjusted gross income) in the year of the withdrawal. This addition to Idaho taxable income may include amounts contributed to the account, as well as earnings.

The recipient makes the addition on Idaho Form 39R (for Idaho residents) or Idaho Form 39NR (for nonresidents or part-year residents of Idaho).

A non-qualified withdrawal is an account withdrawal that isn’t one of the following:

A qualified withdrawal (see above).

A withdrawal paid to a beneficiary of the beneficiary (or the estate of the beneficiary) on or after the death of the beneficiary.

A withdrawal due to the disability of the beneficiary.

A withdrawal because the beneficiary receives a qualified scholarship or tuition assistance, if the withdrawal doesn’t exceed the amount of the scholarship or tuition assistance.

A withdrawal due to the use of education credits as allowed under federal income tax law.

A refund from an eligible educational institution that’s re-contributed to a qualified tuition program if the re-contribution is made no later than 60 days after the date of the refund and doesn’t exceed the refund amount.