There are no taxes or penalties on withdrawals made to fund educational expenses, as long as the withdrawal doesn’t exceed the actual amount of qualified expenses. If excess funds are withdrawn, a portion will be subject to taxation and a 10% penalty (waived in certain cases).
Treatment of Unused Funds:
There are no rules or age limits on when Section 529 funds have to be used by. If there is no longer a need for a Section 529 plan for an individual, it can be rolled over to a wide variety of other potential students including immediate family members of the original beneficiary, parents, cousins, aunts and uncles, and even in-laws!