What does 529 pay for

If room and board are to be paid to a landlord and grocery store, the budget is set by the school and is available to students who are attending half-time or greater. Technology Items — You can use a plan to cover technological needs such as computers, printers, laptops and even internet service. These items must be used by the plan beneficiary while enrolled in college. Books and Supplies — Books and supplies are qualified expenses but only the ones that are required.

Beyond textbooks, some common items include lab supplies, scantrons, and even basics like pen and paper. Student Loan Repayment — Student loan repayment is now a qualified expense on the federal level, but it may not be eligible in your state. See our section below on this new feature.

Click on your state on our plan guide and see if your state qualifes. Plus, if you're using a plan for overseas school or study abroad , Visas and other travel are as not qualified. Sport and Fitness Club Memberships — Many colleges offer sports or fitness clubs for their students to use, and they typically charge a small monthly fee. Many schools offer health services and insurance on campus, which is helpful. Starting in , you are now eligible to use plan expenses for private elementary through high school tuition.

Notice tuition - it's only eligible for tuition. There are a lot of nuances around this especially the states that don't allow it , so check out our full article on using a plan to pay for private elementary school here.

It's important to note, if you pay a student loan with plan money, student loan interest paid for with tax-free plan earnings is not eligible for the student loan interest deduction. If you remember from our previous articles , one of the main benefits of investing in a is the federal and sometimes, state, tax breaks. That means you cannot use a plan to buy or rent a car, maintain a vehicle or pay for any other travel cost.

If you do use a distribution to pay for this type of expense, those distributions are considered non-qualified. An exception to this rule may be if your college charges a travel or transportation cost as part of a comprehensive tuition fee, or if that fee is identified as being required for enrollment or attendance.

Your college may likely require students to have health insurance. Again, there is an exception to this rule. If health insurance is charged by your institution as part of a comprehensive tuition fee or the fee is required to your enrollment or attendance , the cost of your health insurance may count as a qualified plan expense.

Although these costs are required for admission, they are not required for enrollment or attendance. If plan funds are used to pay for any pre-enrollment fees, it will be considered a non-qualified distribution. If you have leftover money in your college savings plan after you graduate, you can use that money to pay off all or part of your student loan debt. The maximum amount that can be withdrawn tax-free from a plan is the total amount of higher education expenses paid during the year, minus any amount used to generate other federal tax benefits.

However, these federal education tax credits are only available for families who meet income requirements. Money in a plan can only be withdrawn tax-free when used for qualified expenses that were not covered by payments that generated the AOTC.

The credit does phase out at higher incomes, so some families may get a smaller credit or not be eligible at all. An accountant or tax advisor may be able to provide more guidance on your specific situation. In order for an expense to be qualified, you must withdraw money from the plan in the year the expense was incurred.

The primary benefit of using a plan for college saving is that the accounts offer tax advantages. The rules surrounding these tax benefits can be complex and vary based on where you live.

Similar to a k plans are investment accounts, and the contributions you make are invested in a portfolio of mutual funds or other securities that may generate income. But, unlike a k , contributions to a plan are made with after-tax money. State-level income tax benefits can vary. Learning Center Guides. Before High School. Make your plan on how best to save. Early High School. Knowledge on college pricing and financial aid.

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