What are qualified expenses for a 529 plan?


Quick Answer

Qualified expenses for a 529 plan include college tuition and fees, textbooks, supplies, and room and board for the college student, as of 2015. Technology-related expenses, such as laptop computers and internet service, also qualify as long as they are required education-related purchases.

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Full Answer

Although a 529 plan provides tax advantages for secondary education, caution is necessary to avoid tax penalties. For example, relative to rental expenses, the 529 plan imposes a cap on the amount of funds that the beneficiary can claim as housing expenses. The Internal Revenue Service only allows an amount up to the equivalent of on-campus housing costs, and housing cost caps are calculated at the school level rather than the national level. For example, if the student lives off campus and pays $800 a month in rent, but university-owned housing is $700 a month, the difference of $100 must come from a source other than the 529 plan. Otherwise, the IRS may impose a tax penalty.

The designated beneficiary must enroll at least half-time in an eligible educational institution to qualify. The school determines the definition of half-time enrollment, and an eligible educational institution is defined as a post-secondary educational institute that qualifies for student aid programs through the U.S. Department of Education.

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