Guide

How are withdrawals from a 530A account taxed?

Last checked October 8, 2026

Before 18, nothing comes out

The law allows only four exceptions:¹

• moving the whole balance to another 530A account for the same child;
• rolling the whole balance into an ABLE account, only during the year the child turns 17;
• taking back a contribution that went over the limit;
• the child’s death.

Hardship withdrawals are not allowed.²

Which money is taxed

The taxable part is taxed at ordinary income rates.³

Every withdrawal is a mix

You cannot take out only the tax-free money first. The tax-free share of a withdrawal is the same as the share of the whole account that is made up of already-taxed contributions.²

An example: an account is worth $100,000, of which $40,000 is family contributions. Forty percent of any withdrawal is tax-free. Of a $10,000 withdrawal, $4,000 is untaxed and $6,000 is taxable income.

That share is worked out on the 530A account alone. Other IRAs the person owns are not blended in.¹

The 10% additional tax

A withdrawal before age 59½ can carry a 10% additional tax unless an exception applies.² The exceptions in the law for IRAs include:⁴

• higher education expenses;
• a first home, up to $10,000 in a lifetime;
• the birth or adoption of a child, up to $5,000;
• disability.

An exception removes the 10%, not the income tax. Treasury describes withdrawals for higher education or a first home as taxed at ordinary income rates with no additional penalty.³

Converting to a Roth IRA

The IRS notice lists Roth conversions among the IRA rules that apply once childhood ends.² It does not explain how a conversion of a 530A account would work, and no further detail has been published.

Moving the money after 18

After childhood ends, the account can be rolled over to another IRA. It can no longer be rolled into an ABLE account.²

If the child dies

If the child dies before the year they would have turned 18, the account stops being a 530A account. Its value, less the already-taxed contributions, is taxable income to the person who inherits it, or is reported on the child’s final tax return if it goes to the estate.¹

No tax along the way

The account is treated as an IRA, so growth is not taxed year by year. Tax is due only when money comes out.¹

What has not been settled

• These rules rest on the statute and one IRS notice. The IRS says it expects to issue more guidance on how withdrawals are taxed.²
• We found no official statement on how college financial aid forms treat a 530A account. The federal aid handbook for 2026–27 does not mention them.⁵
• State income tax can differ. The federal regulations say state treatment depends on each state’s own law.⁶