Planning for education costs if one of the biggest challenge for students and parents when planning for education. 529 Plans are not just for college anymore. They plans can now be used to pay for K-12, private and religious schools, in addition to two and four year colleges, trade schools, graduate programs and some international institutions.
While 529 distributions are not taxed at the federal level, you need to understand which expenses qualify to be paid for with 529 funds.
Here’s a list of 529 qualified educational expenses:
- College or graduate tuition and fees. Post-secondary (after high school) are eligible to participate in the federal student aid program administered by the U.S Department of Education and qualify for use of 529 funds.
- Vocational and trade school tuition and fees. Culinary students can draw from the 529 account to pay expenses related to culinary institute courses. The institution must participate in the U.S Department of Education for federal student aid.
- K-12 schools, public, private, and religious institutions can now use 529 plan distributions up to 10,000 dollars per student for tuition.
Lifestyles and Supplies
- Campus housing can be paid through 529 distributions including college room and board fees. Off-campus housing rentals qualify up the same cost of the room and board on campus
- Books and supplies include paper, pens, textbooks required by the specific course ae qualified expenses. Schools set the budget limit for books and supplies. You need to check with the school of attendance for the allowable amount each academic year.
- Special needs equipment and services qualify for 529 distribution. Students using equipment for mobility (wheelchairs) may be eligible for 529 distribution purchases. Depending on the circumstances transportation may also apply.
These gadgets must be required as part of the students' study programs. Students need to check with the school about class or course prerequisites that include computers.
- Computers must be used primarily by the student during any of the years the student is enrolled at the eligible educational institution.
- Software may qualify as a 529 distribution expense. For example, technical engineering or design classes may involve computerized assignments.
- Internet services can be paid using 529 funds.
Check with the school; there may be specialized expenses as students enter college as a freshman. The same applies as they complete the final years of study, preparing to enter the career world.
Keep in mind, each state and school may have different restrictions on using 529 funds. If you are unsure about anything, check with your financial adviser or plan provider. Withdrawals for non-education expenses will result in a 10% penalty.