Additionally, it doesn't include health or other insurance payments (even when purchased through the college). You can't include parking or similar “optional” fees a student chooses to buy since parking is not considered a requirement for attendance at the college. And no, software used for entertainment like video games does not count as a qualified expense! Cell phones are not included as a qualified expense.įor the most part, optional fees aren't covered. Computers, Fees, Etc: The Devil is in the DetailsĬomputers need to be used by the student during their time enrolled in school. The cost for off-campus housing cannot exceed the allowance for room and board set by the college in their cost of attendance calculations. One important caveat for room & board: the student must be enrolled at least half-time. Furthermore, off-campus housing may be included too. More good news: payment for a dorm room on campus is included as a qualified 529 expense. Supplies and equipment also have to be required items for the course in order for 529 funds to be used. Textbooks need to be required reading for the course. Fortunately, textbooks are a qualified expense and 529 funds can almost certainly be used to pay for them. Over the past 10 years, the average cost of college textbooks has risen four times faster than the rate of inflation. You might have guessed that with online shopping and e-books, that the price of textbooks would have gone down. Assuming you purchase textbooks with personal funds, you can get reimbursed by your 529 plan if you show the receipts. Room and board (as long as the student attends more than half time)Ĭomputer or peripheral equipment, computer software, or internet accessĭon't forget about textbooks - and be sure to save your receipts. See the list of eligible education institutions here by clicking here.Įxamples of Qualified Expenses What are qualified expenses that can be paid with 529 money?Įxpenses for special needs services necessary for the student to be able to attend college The word "designated beneficiary" refers to the person named in your 529 plan and can be a child, a grandchild, a relative, a friend, or even yourself.Īn "eligible educational institution" includes almost all accredited post-secondary institutions, even some international institutions. The IRS defines qualified education expenses as “expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution”. What exactly are “qualified expenses”? What expenses can be paid tax-free from the 529 plan? And perhaps most importantly, what things can you NOT use your 529 funds for? What is a Qualified Expense? When it comes to paying that college bill, you probably have some questions. To enjoy the full tax benefits of a 529 plan, funds must be used to pay for qualified higher education expenses. However, for a non-qualified distribution, you will incur income tax and a 10% penalty on the earnings portion. Keep in mind, you can withdraw money from a 529 plan at any time for any reason.Īs long as you use the funds for a qualified distribution, the money comes out tax-free. If you've got a child entering college in the near future, hopefully, you've also got a 529 account in place and ready to cover some of the costs of tuition and all the other associated expenses.
0 Comments
Leave a Reply. |