Impact of Scholarships on 529's

What would happen to the money in a child's 529 account if they were to receive a scholarship for college, or attend a service academy (no charges/fees)? Could we get it/use it for anything else at that point?

See IRS Publication 970. If your child receives a scholarship you can withdraw a like amount from the 529. The withdrawal would be considered nonqualified, so the earnings component would be taxable (generally to the account owner) but would not be subject to the 10% penalty normally applied to the earnings oomponent of NQWs.

Interestingly, service academy appointments are not considered scholarship and the current read I have seen on these is that withdrawals would be subject to both tax and penalty. I think you can expect that this will change, if it hasn't already.

Hope this helps.

TJ