CollegeBacker Blog (Author)

How can I spend my 529 College Savings Plan? 01 MAY 2017 on Qualified Education Item

529 College Savings Plans provide a tax-advantaged way to save for college or other post-secondary training. While the money invested in a 529 is post-tax, the account grows tax-free. Another key benefit to a 529 is that you don’t pay taxes when the funds are spent on the designated beneficiary’s qualified educational items. You can broadly think of a 529 as a Roth IRA, but for college.

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Where can I spend it? Funds from a 529 can be spent on any higher education institution that qualifies for federal financial student aid, including state universities, out-of-state colleges, private colleges, and many institutions abroad.

What can I spend it on? A qualified education item includes tuition, school fees, room and board, books, and special education expenses. 529 accounts can also be used to purchase any computer technology, related equipment and related services such as Internet access. Computer technology does not include items such as games, entertainment, and non-educational audio equipment.

What if I spend it elsewhere? In a pinch, you can always withdraw the principal penalty-free for any purpose. However, if you withdraw the gains for non-qualifying expenses such as travel, entertainment, or dining, you must pay taxes and a 10% penalty.

Did we miss anything? These are the most common questions about spending 529 funds we’ve encountered. If we left out any questions that you have about using a 529 or if you have any feedback, let us know at support@collegebacker.com or on Facebook.