529 plans are an excellent tool for saving for future education expenses, offering numerous tax advantages and flexibility. These state-sponsored investment accounts are designed to help families and individuals save for education-related costs, including college, vocational schools, and even K-12 education. Understanding the eligible expenses that can be covered by 529 plan funds is crucial for maximizing the benefits of these accounts. In this blog post, we’ll provide you with a comprehensive list of eligible 529 plan expenses per IRC Section 529(e)(3) to help you make informed decisions about your education savings.

Tuition and Fees:

• The most obvious and widely known eligible 529 plan expenses are tuition and fees at eligible institutions. This includes colleges, universities, vocational schools, and some K-12 educational institutions.

Room and Board:

• 529 plan funds can be used to cover the costs of room and board, including on-campus dormitory fees and off-campus housing expenses up to the institution’s published cost of attendance.

Books and Supplies:

• Expenses for required textbooks, laboratory supplies, computer equipment, software, and other necessary educational materials are considered eligible 529 plan expenses.

Technology and Equipment:

• Computers, laptops, tablets, printers, and other technological devices necessary for education can be purchased using 529 plan funds.

Study Abroad Programs:

• 529 plan can also be used to pay for study abroad expenses. While it is commonly used for qualified higher education expenses within the United States, it can also be used for certain expenses related to studying abroad. 
• The educational institution where the study abroad program takes place must be eligible to participate in the federal financial aid program. Most accredited institutions meet this requirement, but it’s important to verify the eligibility of the specific institution.
• Only certain expenses are considered qualified expenses when using a 529 plan for study abroad. Tuition, fees, books, supplies, and required equipment are generally covered. Additionally, room and board expenses may be eligible if the student is enrolled at least half-time. However, expenses for travel, personal expenses, and non-required equipment may not be considered qualified expenses.
• The study abroad program must be part of the student’s degree program at an eligible institution.

Special Needs Expenses:

• If the beneficiary has special needs, certain additional expenses related to their education, such as tutoring, specialized equipment, and therapies prescribed by medical professionals, may be eligible for 529 plan coverage.

Internet Access:

• With the increasing reliance on digital resources, internet access expenses incurred for educational purposes can be covered by 529 plan funds.

Educational Software:

• Software and online tools that are primarily used for educational purposes, such as language learning programs, educational games, and research software, can be considered eligible 529 plan expenses.

Transportation:

• Transportation costs related to attending an eligible educational institution, such as bus fare, gas expenses, and parking fees, may be eligible for 529 plan funds. However, it’s important to note that commuting expenses for K-12 education are generally not considered eligible.

Career and Technical Education:

• Certain vocational and technical education programs, including eligible certificate programs, may be covered by 529 plan funds. It’s important to ensure that the program meets the necessary criteria for eligibility.

Student Loans:

• 529 plan funds can be used to pay down qualified student loans. However, there are certain limitations and restrictions, so it’s advisable to consult with a financial advisor or tax professional for specific details.

Apprenticeship Programs:

• Expenses associated with registered apprenticeship programs approved by the U.S. Department of Labor may be considered eligible 529 plan expenses.

Homeschooling Expenses:

• For homeschooling families, some states allow 529 plan funds to be used for eligible educational expenses, including curriculum materials, textbooks, and online learning resources.

529 plans are not for everyone and not all 529 plans are alike. You should fully understand the benefits and the disadvantages of the 529 plans before making a decision. In addition, your state may offer additional tax benefits for using your state’s 529 plan while other states may have better investment options or lower fees.

529 plans offer individuals and families an effective means of saving for education expenses while enjoying tax advantages. By understanding the broad range of eligible 529 plan expenses, you can make informed decisions about how to allocate and spend your funds. Remember to consult with a financial advisor or tax professional for specific guidance tailored to your unique circumstances. By maximizing the use of eligible 529 plan expenses, you can make the most of your education savings and provide a solid foundation for a brighter future.

Looking for an independent fiduciary financial advisor who can advise you on investments, retirement, real estate, alternative assets, and taxes? Contact ACap Advisors & Accountants to schedule a free initial consultation. Our clients include individuals, small businesses, entrepreneurs, and anyone serious about saving and investing for their future.