Tamara is the beneficiary of a Section 529 plan. This year, a distribution was made to pay for her enrollment at a qualifying educational institution. However, Tamara decided to drop out early in the semester and received a full refund of her tuition.

Tamara may avoid income taxes and penalties on the taxable portion of the distribution by:

Using the amount toward qualifying education expenses within the next two calendar years.

Demonstrating that her annual health care costs exceeded the total amount of the distribution.

Contributing the distributed amounts to a tax-favored retirement plan, such as an IRA.

Recontributing the distributed amount within 60 days

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