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529 Plan Allowable Expenses
If your beneficiary is enrolled in a college or university, room and board costs are qualified under the 529 plan. The only catch is that the student must be at least half-time to qualify. Some other expenses are not eligible for this type of plan, including insurance and medical expenses.
Foreign Schools Are Considered Qualified
To receive a 529 plan allowance, the beneficiary must be enrolled at least half-time in an eligible institution. That institution may be an American college or university or a foreign institution.
The beneficiary must also be enrolled in a program qualified for Title IV federal student aid. The Department of Education maintains a list of eligible schools. The list currently lists 760 schools.
If the beneficiary is enrolled in a program sponsored by a U.S. college, his or her room and board expenses will be covered. Foreign schools are also eligible as long as they are listed on the Federal School Code List. Nevertheless, many conditions must be met to use 529 plan allowances for studying abroad.
The first criterion for student eligibility is whether the student has a high school diploma or equivalent. This does not include a GED certificate or state certificate. However, if the student has a foreign secondary education credential, this will be counted as a high school diploma.
The second criterion for 529 plan allowances involves the student’s living expenses. Living expenses are included in the plan if the student is enrolled at least half-time. These expenses must not exceed the college’s published allowance for room and board. Students must also keep records of these expenses.
Off-campus Housing is a Qualified Expense
Room and board expenses may be reimbursed for students living off campus through a 529 plan. However, the reimbursement amount may not cover the entire cost of housing.
The amount you can reclaim depends on the maximum amount a college will allow for off-campus living expenses and the published price of attendance.
If you’re living off-campus, you can use 529 plan funds for rent, food, and utilities, as long as the costs are below the college’s published room and board allowance. If you’re paying for room and board, keep records of all your expenses.
To qualify, you must be enrolled at least half-time in an approved college program for tuition and room and board expenses.
These expenses can include off-campus or on-campus housing costs. They also have to be incurred during the academic term.
Whether you’re attending a traditional school or one that offers study abroad programs, ensure the school’s financial aid office can confirm your eligibility.
Although many families choose to live on-campus for their first two years, you can use your 529 plan to pay for off-campus housing expenses. Be sure to make the payment directly to the college or university. The school will provide you with instructions on how to pay for your off-campus housing.
Aside from housing, food expenses are often another frequent use of a 529 plan. While meal plans fall under the category of “board,” you can also use the money for groceries or other meals if you can provide appropriate receipts.
Fraternity or sorority dues, however, are not qualified expenses. However, you can cover the cost of membership in these organizations with your 529 plan.
Books and Supplies Are a Qualified Expense
Books and supplies are an essential part of the school. They are necessary for studying and can be paid for with the help of 529 funds. However, you should note that some items are not qualified expenses.
On-campus housing and meal plans are considered qualified expenses, but off-campus housing is not. You can claim a portion of the housing expense but not the entire amount. For example, you can claim the cost of pizza and room service for your child but not the cost of books and supplies.
While on-campus housing costs are excluded from 529 plan contributions, room and board expenses may be included in a student’s cost of living. However, you must be enrolled at least half-time to qualify for this expense.
The cost of off-campus housing cannot exceed the room and board allowance set by the college. In addition, you can also use your 529 plan funds to pay for the room and board of a study abroad program. As long as the home college approves the program, these costs are qualified expenses.
Books and supplies are an essential part of college costs. In addition to tuition, colleges often require fees for room and board and other necessities. Using your 529 plan funds to cover these costs will help you save for college. Some schools also need student health insurance, but your 529 plan does not cover it.
A 529 plan allows you to invest your money in higher education and earn tax-free income. If you withdraw the money to pay tuition, you should file taxes. However, if you withdraw money for expenses other than education, the funds will be taxed as ordinary income, subject to a 10% federal income tax penalty.
College Entrance Exams Are Not Ineligible
College entrance exams are not considered ineligible expenses for a 529 plan. However, these fees are not tax deductible. You may be eligible to use some of your plan funds for these fees. For example, you may be able to use your 529 plan funds to pay for meal plans.
However, be sure to keep receipts for these expenses. Other non-qualified expenses include dues to sororities and fraternities. These fees can also be categorized as room and board expenses.
The expenses you can use to further your education are referred to as qualified education expenses. These expenses must be paid to attend a college or university. They must be incurred by the designated beneficiary of the 529 plan.
This person can be your child, grandchild, relative, or friend. The institutions qualifying for the 529 plan are accredited postsecondary institutions and some international institutions.
The funds from a 529 plan may also be used for graduate school or other educational institutions outside the U.S. For this purpose, the school must be on the Department of Education’s list of accredited postsecondary institutions.
Additionally, room and board expenses are allowed if the student is enrolled at least half-time. The funds from a 529 plan are tax-deductible as long as they are used for qualified educational expenses.
An eligible education expense can include tuition, room and board, supplies, and any services related to school. You can’t spend more than the school charges for these services. Moreover, you must keep all records related to the school.
Room and board and food expenses are also allowable 529 plan expenses. However, they cannot exceed the limit set by the college.
You can find the cost of attending a college on the school’s website or in the financial department of the college you are planning to attend. You can also use your 529 plan for your beneficiary’s computer software during school. However, you cannot use your 529 plan for cell phones.