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Are earnings and withdrawals state or federally tax-free?

April 26, 2017Earnings federally State tax-free withdrawals

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Are earnings and withdrawals state or federally tax-free?

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Yes. If used for Qualified Higher Education Expenses, investment earnings and withdrawals are currently both state and federally tax-free. This provision is subject to potential sunset revisions on December 31,2010. At that time Congress may change the tax-free withdrawal status for qualified education expenses.