What Are Some Allowable 529 Expenses?


Quick Answer

Allowable expenses for tax-free distributions from 529 college savings plans include tuition, fees, books, supplies and equipment, reports the Internal Revenue Service. Special needs beneficiaries can pay for services they require in connection with school attendance. Room and board is an allowable expense for students enrolled at least half-time.

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Full Answer

Beneficiaries can use funds from qualified tuition programs, also known as 529 plans, to pay for required expenses for enrollment and attendance at postsecondary educational institutions such as universities, colleges and vocational schools, explains the IRS. Although students enrolled half-time or more can use the funds for room and board, the cost cannot exceed what the student would pay in campus housing. Computers and Internet services are allowable expenses only if the educational institution requires them. The funds in a 529 plan are transferrable from one beneficiary to another beneficiary in the same family without penalty.

Any educational expenses that the beneficiary incurs for kindergarten through grade 12 are not allowable, points out About.com. Additionally, transportation and entertainment expenses are not allowable, states Bankrate. Owners of 529 plans should keep documents to prove all allowable expenses. Although legitimate distributions from 529 plans are tax-free, owners must pay income tax and a 10 percent penalty on all funds that they withdraw for unqualified expenses, as of July 2015.

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