This article is not intended as tax advice, and Wealthfront does not represent in any manner that the outcomes described herein will result in any particular tax consequence. Financial advisory services are only provided to investors who become Wealthfront clients. This article is not intended as investment advice, and Wealthfront does not represent in any manner that the circumstances described herein will result in any particular outcome. Nothing in this article should be construed as tax advice, a solicitation or offer, or recommendation, to buy or sell any security. This documentation could be necessary to show that your 529 funds were used in compliance with 529 requirements. Keep all of your receipts with the rest of your tax-related paperwork. Make purchases and payments for items that are on the list of qualified expenses separate from purchases that are not qualified expenses. Funds set aside for future school years should stay in the 529 plan until they are needed. When you withdraw funds from your 529 account, keep the tax advantages of your distributions by only taking out the amount you need to pay the student’s qualified expenses for the year. For example, adaptive technology for vision and hearing impaired students may be eligible for payment with 529 withdrawals.Įxamples of non-qualified expenses include optional fees, travel expenses, costs related to team sports, and computer software not required for education. It is often possible to apply this figure towards students’ qualified expenses.įinally, the equipment required to make it possible for special needs students to attend school is usually considered a qualified expense. The school’s financial aid office reports an average cost of room and board to the federal financial aid program. On-campus housing is a popular use of 529 withdrawals, but many families don’t realize that some off-campus housing – including commuting from home – can also be considered a qualified expense. Having this category of expenses included in the list of qualified expenses is a big relief since classes at many schools today require students to go online to collaborate with classmates or submit assignments. There are some lesser-known uses for 529 funds, beginning with certain computers and related equipment. This is especially helpful for students who choose fine arts, science and technology majors, as these often come with a long list of required equipment for class participation. In addition, required books and supplies also qualify. Most basic education costs fall under the definition of qualified expenses, including tuition, mandatory fees, housing, and meal plans. While the rules are designed to be flexible, there are important details to consider. To protect your tax-advantaged status, you must use withdrawals on qualified education expenses, which are defined by the IRS. Keep receipts for payments made with 529 plan funds.Īfter years of careful saving, you want to be sure you get the most from your 529 plan funds.Basic qualified expenses include tuition, room and board, books, and mandatory fees, but other expenses may also qualify.529 funds must be used for payment of qualified expenses to maintain tax-advantaged status.
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