Section 529 Plan Qualified Expenses

This can occur when a student drops a class mid semester.

Section 529 plan qualified expenses. Qualified 529 plan expenses include costs required for the enrollment or attendance at a college university or other eligible post secondary educational institution. The path act change added a special rule for a beneficiary of a 529 plan usually a student who receives a refund of tuition or other qualified education expenses. Qualified 529 plan expenses with a 529 college savings plan investments grow tax deferred and are not taxed when withdrawn to pay for qualified higher education expenses including tuition fees textbooks supplies and equipment required for enrollment special needs services and in some cases room and board costs.

A qualified tuition program qtp also referred to as a section 529 plan is a program established and maintained by a state or an agency or instrumentality of a state that allows a contributor either to prepay a beneficiary s qualified higher education expenses at an eligible educational institution or to contribute to an account for paying those expenses. Qualified expenses for a 529 plan a 529 plan only covers expenses that are related to post secondary education see below for using a 529 plan for elementary education. Starting january 1 2018 the definition of qualified higher education expenses for tax purposes is expanded to include up to 10 000 per year in tuition for k 12 schools as a result of the 2017 tax cuts and jobs act.

Any reference in this subsection to the term qualified higher education expense shall include a reference to amounts paid as principal or interest on any qualified education loan as defined in section 221 d of the designated beneficiary or a sibling of the designated beneficiary. Eligible educational institutions can also establish and maintain qtps but only to allow prepaying a beneficiary s qualified higher. The federal government has also built in many safeguards to make certain that you don t abuse its kindness.

Distributions made from section 529 plans for payment of qualifying educational expenses are free from federal income tax. However there are rules. As of 2019 qualified expenses include tuition expenses for elementary middle and high schools private public or religious.