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What can my 529 plan be used for?

December 13, 2018

The 529 College Savings Plan is a great way for parents to save for college. The account holder (usually the parent of the beneficiary), family members, and friends can contribute after-tax dollars to the account. The account accrues interest and is open for contributions until it meets the state maximum, which is usually $300,000 - $500,000. The account can be used for both undergraduate and graduate programs, as well as a variety of other post-secondary programs.

What can the 529 plan be used for?

The 529 plan can be used for Qualified Higher Education expenses (QHEE). It’s important to keep track of your expenses, and not exceed allowable limits. If a 529 plan is used for an ineligible expense, it will be deemed a withdrawal, and taxes and penalties will apply.

K-12 Educational Expenses

Though traditionally used for postsecondary programs, the Tax and Job Cuts Act of 2017 made it possible for 529 plans to be used for kindergarten through twelfth-grade tuition and expenses at non-public schools. The account holder can use up to $10,000 each year for K-12 education.

College and University Degree Programs

College degree programs are the most common way to use 529 plans. The plan can be used to cover expenses at both the undergraduate and graduate level. Eligible expenses include:


Qualified Expenses

Tuition All fees related to courses and enrollment
Books Required books for classes, suggested and supplemental materials may not be covered
Tech Computers, printers, and internet service are all qualified expenses, as is specific software programs, such as Microsoft Word and Adobe Creative Suite for design students
Equipment Any other equipment students need to complete coursework
Room and Board Only up to the projected expenses as outlined in the school's federal financial aid calculations; check with the financial aid office if unsure

A Note on Room and Board Requirements

It’s essential that the room and board expenses paid with a 529 plan do not exceed the room and board estimates used to calculate financial aid for the university. If the student is living on campus, you generally don’t have to worry about this requirement. Dorms and campus-owned apartments usually meet requirements.

Some students erroneously believe that you can’t use the 529 plan for off-campus housing. You can find housing off-campus, but rent that exceeds the school’s official estimates in the financial aid package, would not be a qualified expense and would result in a penalty.

Alternative Post-secondary Education

Though most people use the 529 plan to pay for degree-programs, the account can be used to fund a variety of educational programs including the following:

  • Community college

  • Certificate programs

  • Trade school

  • Vocational school

  • Continuing education

Using the School Search feature on the FAFSA website, you can find a list of schools where the 529 plan may be used.

What is not a qualified expense under the 529 plan?

The 529 plan cannot be used for hardships unrelated to eligible educational expenses, even if it directly relates to the beneficiary. Personal expenses, including transportation costs, are not qualified expenses for the 529 plan. Examples of expenses that are not qualified include:

  • Plane tickets from home to school

  • Gas to and from school

  • Groceries

  • Toiletries

  • Medical Bills

  • Clothing

  • Smartphones

  • Insurance

  • Sports and club fees

  • Student loan repayment

In addition to funding the 529 College Savings Plan, it’s important to factor personal funds into the college budget to cover the expenses above. If a withdrawal to the 529 plan does not cover an eligible expense, it is subject to a 10% penalty, and the account holder must report the earnings as taxable income.

How to Avoid Penalties

To avoid penalties on your 529 plan, you’ll need to total all qualified expenses and subtract any grants, tax-free scholarships, tax credits, and other assistance. The remaining amount is what you can use your 529 plan to pay. If there is a miscalculation and you use more than our QHEE, you may owe a penalty on the amount. To ensure you only spend on qualified expenses, it’s best to keep good records.

Keep Complete Records

It’s important to keep records and receipts for all qualifying expenses because you have to report all of your qualified expenses to the IRS. Try to purchase qualifying expenses separate from ineligible expenses. Records you should keep include tuition and bills from the educational institution, and receipts for school supplies, books, and a laptop or computer. It may also be helpful to retain records of estimated expenses as detailed by the school in their admission packet to support your claims.