Supplies such as pens, paper, printer ink and any books or supplies required by specific classes are also qualified expenses.Ĭaution: The school will set the budget for books and supplies, so check with them for the allowed amount.ĥ. Books and supplies: So long as they are required, these are qualified expenses. Fees: All fees, such as administration, lab and technology fees required by the school, are an eligible expense.Ĥ. If the student’s expenses are higher than the allowable amount, the difference must be paid from funds that do not come from the 529 account.ģ. Off-campus housing and meal costs are eligible up to the college’s published allowances in their “cost of attendance” figures.Ĭaution: 529 Funds used to pay for rent or meals in excess of the allowances published by the college’s annual cost of attendance (typically found online from the admissions or financial aid office) are not qualified expenses. Room and board: On-campus dormitory room and board is a qualified expense. Tuition: For full time and part-time students at an accredited institution.Ģ. The list of QHEEs is not long, and you should not have a problem if you stick to the list below. 529 plans can be used to pay for two and four year colleges, vocational and technical schools, graduate school programs and some international schools as long as they are an eligible 529 institution based on their Federal School Code. Students must be a full-time or at least part-time student enrolled at an accredited institution. What is a 529 Qualified Higher Education Expense (QHEE)? The principal portion of any withdrawals, which is made up of your after-tax contributions, will never be taxed or penalized. If money from a 529 plan is used for anything that does not meet the “qualified expense” criteria, the earnings portion of that non-qualified distribution will be taxed as ordinary income and subject to a 10 percent penalty.Įxceptions to the 10 percent penalty rule pertain to a beneficiary who becomes disabled, attends a U.S. These funds can also affect a student’s financial aid, so it’s a good idea to get the facts first to avoid any unforeseen problems.Īs long as 529 plan withdrawals are used for “qualified higher education expenses” (QHEE) during the year in which they are withdrawn, account earnings are tax-free. Because 529 accounts are tax favorable, they have strict rules on what the money can be used for, when the withdrawals must be used and what happens if you take out too much. It’s a great question, and one to ask before you start withdrawing from your 529 savings, since not all college expenses are considered qualified expenses. The question that comes up time and again when we meet with clients is what expenses those 529 accounts will cover. Parents and students will start to access college 529 funds they have saved specifically to pay for many of these college expenses. WASHINGTON - The ads for getting your college student ready to go off to school are now in full swing, touting everything they will need to outfit their dorm rooms and apartments, from mini-fridges to computers. Business & Finance Click to expand menu.
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