# 529 Plan Penalties Average Just $464 IRS data shows 529 plan penalties are lower than expected. - **Source:** [The College Investor](https://brifing.si/source/d431d77d-492e-4105-be7c-2525bbb643ab) - **Published:** 2026-07-18 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/9756680f-f9d9-4069-b415-32bdc2c62037 ## What Are 529 Plan Penalties? 529 plans are tax-advantaged savings accounts for education expenses. However, a 10% penalty tax applies to non-qualified withdrawals. This penalty can deter families from investing in these plans. ## What Does IRS Data Show? In 2023, only 165,152 tax returns paid 529 plan penalties. The total penalty amount was $76.6 million, averaging $464 per return. This represents just 0.1% of all tax returns filed. ## Why Are Penalties So Low? Penalties are low because the 10% tax applies only to the earnings portion. Additionally, exceptions like scholarships, death, or disability can waive the penalty. ## Is It Possible to Avoid Penalties? Yes, qualified expenses now cover more than just college tuition, including K-12 education, student loans, and professional licenses. This makes it easier to avoid penalties. ## Advantages of 529 Plans 529 plans are attractive savings tools for families due to their tax advantages and flexible usage options. The low penalty risk further enhances their appeal. ## Conclusion: Penalties Are Not a Dealbreaker IRS data shows that 529 plan penalties are lower and rarer than expected. Families can set aside penalty fears to take advantage of the tax benefits these plans offer. ## Sources covering this story - https://thecollegeinvestor.com/84560/irs-data-families-paid-just-464-on-average-in-529-plan-penalties/ — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._