Q:

What are some allowable expenses on a 529 College Savings Plan?

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Quick Answer

Allowable expenses on a 529 plan include costs directly related to education, such as tuition, other school fees, books, and room and board, according to the IRS. The IRS also allows disbursement of funds for computer technology and related equipment or services, such as Internet access. The beneficiary must use these funds during the years he is enrolled at an eligible school, and the materials or services must have an educational purpose and not be primarily for entertainment or amusement.

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Full Answer

Eligible educational institutions for the use of 529 funds include any university, college, trade school or other post-secondary school that participates in the U.S. Department of Education's student aid programs, states the IRS. As long as the funds go towards a qualified expense, the disbursement is non-taxable. The custodian of the account may also switch the beneficiary without tax consequences, as long as the new beneficiary is a member of the same family. The distributed funds are also non-taxable if the custodian rolls them over into another plan for the beneficiary or family member. Most 529 plans allow the beneficiary to use the funds for attendance at any school, but some plans require the beneficiary to attend a school within the state that sponsors the plan.

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