As the new school year approaches, it is a great time to review your education expenses and make sure you are using your 529 savings plan to its fullest potential. Managing the cost of education can be challenging, but a 529 plan can provide valuable assistance. These tax-advantaged accounts were originally designed to cover college expenses, but their flexibility has grown. Today, 529 funds can be used not only for college but also for K–12 tuition at public, private, and religious schools, as well as expenses related to two- and four-year colleges, trade schools, graduate programs, and some international institutions.
Understanding 529 Plans
To ensure your withdrawal is considered qualified, the distribution must occur in the same calendar year the expense is incurred. Taking a withdrawal at the wrong time could result in taxes and penalties.
Here are some common qualified education expenses:
Tuition and Enrollment Costs
Higher education includes most colleges, universities, and graduate programs that participate in federal student aid programs. Vocational or trade schools include institutions like culinary schools, as long as they are eligible for federal student aid. For K–12 education, up to $10,000 per student, per year, may be used toward tuition at eligible elementary or secondary schools.
Room and Board
On-campus housing expenses are covered, while off-campus housing may qualify only up to the school’s published cost of attendance.
Books and Supplies
Required textbooks, paper, pens, and other course materials are covered, up to the school’s budget for supplies.
Special Needs Services
Equipment and services for students with special needs may qualify, including certain transportation costs.
Technology and Internet Expenses
Technology is often essential for learning, and certain tech-related expenses may also qualify. Computers must be used primarily for educational purposes while the student is enrolled. Software must be required for a specific course, such as those in design or engineering programs. Internet access may qualify in some cases, but it’s best to confirm with your provider and the plan sponsor.
Understanding what your 529 plan covers can help you avoid unexpected expenses and make smarter decisions for the school year ahead. Because rules and benefits can vary by state and school, be sure to consult with your plan provider, the school, or a member of our team to confirm that your intended uses are qualified.