#Withdrawal rules for 529 plans software

Transportation and travel costs, insurance, sports activities (unless required), and health club memberships are not covered.

#Withdrawal rules for 529 plans software

The College Board found the average cost for required reading and supplies in the 2019-20 school year was $1,240.Ĭomputers generally qualify, but not software for games or hobbies. The cost for books is limited to those deemed required reading for a course. Qualified room and board expenses are limited to the equivalent charged to live in school-sponsored housing, even if your child lives off-campus. Remember those exceptions? Well, you can’t put your kid into the penthouse suite at the Four Seasons. Read more about how your 529 Plan can help your grade school kids. To get that number, add up all the eligible expenses and subtract any costs covered by tax-free assistance, such as scholarships, fellowships, Veteran’s benefits, Pell Grants, and the American Opportunity Tax Credit (AOTC).Īlso, in 2017, Congress expanded the 529 Plan program to include up to $10,000 for K-through-12 private school tuition, as well as apprenticeships at Labor Department approved programs. Qualified withdrawals cannot exceed your child’s QHEE’s. 529 Plan Withdrawal RulesĪccording to the IRS, withdrawals from 529 Plans are tax-free “when used for qualified education expenses of the designated beneficiary,” as described above. However, all of these come with exceptions. In addition to tuition, qualified expenses include room and board, books and supplies, computers and related equipment, as well as money used to repay student loans (capped at a $10,000 maximum lifetime limit per student). Tuition payments must be for a degree program or other recognized academic credit at the college level. Qualified education expenses are the amounts you pay for tuition, fees, and additional related expenses for eligible students, at eligible educational institutions. One of the first things you need to do is get familiar with the terms “Qualified Educational Expenses (QEE)” and “Qualified Higher Education Expenses (QHEE).” These are the IRS guidelines for spending your 529 Plan savings on legitimate expenses. That’s a lot easier if you’ve been stashing away money in a tax-free 529 College Savings Plan, but make sure you handle the 529 Plan withdrawals properly to avoid taxes, penalties, and headaches. Your son or daughter has been accepted to college, and now you get to pay (some of) the bill.