Future Scholar 529 Participants Reminded of Need to Reinvest
State Treasurer Curtis Loftis announced yesterday that participants in Future Scholar, South Carolina’s 529 College Savings Plan, now have until July 15, 2020 to recontribute any refunded qualified education expenses to their Future Scholar accounts.
“Since colleges and universities have transitioned to online learning in response to the COVID-19 pandemic, many are issuing refunds to students for various expenses, like housing and meal plans,” said Treasurer Loftis, who serves as administrator of the state’s 529 plan. “We want to remind Future Scholar account owners and beneficiaries that if a student receives a refund for expenses previously paid for with funds from a 529 account, those funds should be recontributed to their 529 account by July 15, 2020 to avoid potential interest and penalties.”
If the refund is not recontributed by July 15, 2020, the original withdrawal may be deemed non-qualified because the funds are no longer being used for qualified higher education expenses. Participants will then be subject to tax penalties and may be responsible for paying federal and/or state income taxes on the earnings portion of the funds.
“The great new is, once these funds are recontributed, 100% of the recontribution is deductible on your South Carolina tax return,” Loftis added. “And with this year’s tax filing deadline extended to July 15, you can choose to claim these contributions as a deduction for 2019 or 2020.”
Funds may be recontributed to any 529 plan that is designated for the same beneficiary for which the funds were originally withdrawn. Once recontributed, funds will appear just as any other contribution made to a Future Scholar 529 account, so maintaining a record of these transactions is recommended.
This extended date for recontributions only applies to plan participants who receive a refund this spring because of COVID-19. For any other refunds, participants must recontribute funds within 60 days of the refund to avoid tax penalties.
About Future Scholar
Future Scholar is South Carolina’s 529 College Savings Plan, administered by the State Treasurer’s Office. For more information, visit FutureScholar.com or follow @SCStateTreasurer on Facebook. No state funds are used to market Future Scholar.