Using Your Money
What can the money be used for?
The money in your account can be used to pay for qualified higher-education expenses at any eligible college, university, vocational school, or other post-secondary institution in the country (as well as some outside of the U.S.). Click here to search for all eligible schools. Eligible expenses include tuition, fees, supplies, books, and required equipment. In addition, certain room and board costs are included. The beneficiary must be enrolled at least part-time and there are limits on the total room and board costs per academic year. More information about eligible expenses is available in IRS Publication 970, Tax Benefits for Education. Qualified expenses also include the purchase of computer technology, equipment, or Internet access and related services paid for or incurred in 2009 or 2010, if such technology, equipment, or services are to be used by the beneficiary and their family during any of the years the beneficiary is enrolled at an Eligible Educational Institution.
What are the limitations on which room and board expenses are covered?
Beneficiaries must be enrolled at least half-time at a post-secondary institution for room and board expenses to be considered an eligible education expense. If the beneficiary lives in housing operated by the educational institution, the cost cannot exceed what is normally assessed for most students. The limit for room and board is based on a stated "cost of attendance" provided by each institution. This allows for more realistic distributions in areas where the cost of living is higher.
Does the money have to be used for a college in a specific state?
No, the money in a tomorrow's scholar® account can be used at any eligible education institute in the U.S. (and even some outside of the U.S.).
Can money in the account be used for graduate studies?
Yes. The money in your account can be used for graduate school, law school, medical school, or just about any higher educational program.
How is the money taxed when I withdraw it?
If the funds are used for qualified college expenses, your withdrawal is federal tax free. Wisconsin residents will owe no state income tax on qualified withdrawals.
Can I withdraw money from the account for non-educational purposes?
Yes. The account owner may withdraw money for non-educational purposes, but the earnings portion of this money will be subject to a 10% additional tax and will be federally and state taxed.
What happens if the beneficiary receives a scholarship?
If the designated beneficiary receives a qualified scholarship, funds from the account, up to the amount of the scholarship, may be returned without penalty.
- What if my child decides not to go to college or drops out at some point?
- If the beneficiary does not use the money:
- The account can be redesignated to another beneficiary who is a
 member of the family.
- You can close the account and receive the balance at any time. There is a 10% additional tax for withdrawing funds this way, and federal and state income taxes must be paid. The penalty is waived if the distribution is due to the death or disability of the beneficiary or if a scholarship or nontaxable grant is awarded to the beneficiary.
- The funds can remain in the account until the beneficiary returns to school.
How do I request a distribution?
To request a distribution from a tomorrow's scholar account, the account owner needs to complete a Distribution Request form. If the account owner selected the Redemption Option at account opening, then he or she can call 1-866-677-6933 to request a distribution or log in to Online Account Access. (Distributions done online will be sent by check to the address of record.) An account owner may add the Redemption Option feature at any time by completing the Account Change Request form.
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