Unlocking the ABCs of 529 Plan Expenses: What Qualifies and What Doesn't

Let's dive down into the qualified expenses of a 529 plan. Qualified higher education expenses include costs required for the enrollment and attendance of an eligible post-secondary educational institution, including colleges, universities, vocational and trade schools (you can find a list here). Many are surprised that you can use up to $10,000 per year towards tuition for K-12 public, private, or parochial elementary and secondary schools as well. Below is a breakdown of common qualified expenses:

The full amount of tuition and required fees.

Books and supplies required to participate in a class for post-secondary education only.

Computers, software, and internet access for post-secondary education only.

Room and board, which includes off-campus and non-university managed accommodations up to the allowance reported by the college in its "cost of attendance" figures. The student must be enrolled at least half-time.

Student loans, YES! Thanks to the SECURE Act, you can now apply the lifetime limit of $10,000 toward student loans.

If you use your 529 funds for non-qualified expenses, the earnings included in your distribution will be taxable. A few common items that are not considered qualified:

Transportation and travel costs include buying, renting, or maintaining a vehicle, gas, or transit passes. One exception to this rule is that if your college charges a transportation cost as part of a comprehensive tuition fee or if the fee is identified as required for enrollment or attendance, it is considered qualified.

Health insurance- If your college requires it, you will typically receive a waiver if you are covered under your parent's health insurance.

Although required for admission, college application and testing fees are not required for enrollment or attendance.

Check out our previous blog post, "Maximizing Your 529 College Savings Plan: Navigating SECURE Act 2.0 Changes," which discusses the existing and updated options for remaining 529 balances.