By Rajkamal Rao
|Image Courtesy: U.S. Department of Education|
Section 529 of the Internal Revenue Code allows states, state agencies, and eligible educational institutions to sponsor qualified tuition programs (529 plans), which are tax-advantaged vehicles designed to encourage saving for future qualified higher education expenses and certain K-12 tuition expenses of a beneficiary.
Funds in the 529 plan can be used for "qualified" education expenses when the student attends an eligible educational institution. An eligible educational institution is any college, university, or vocational school in the United States or abroad qualified to participate in federal student aid programs. You can determine the eligibility of an educational institution by going to the U.S. Department of Education’s Database of Accredited Post Secondary Institutions and Programs (DAPIP) or the Federal Student Loan Program list.
To be considered a qualified withdrawal, money must be withdrawn from an account in the same period that educational expenses are incurred. Examples of qualified education expenses:
- K-12 tuition expenses of an account beneficiary who attends a public, private or religious school (up to $10,000 per calendar year per beneficiary from all qualified tuition programs).
- College tuition, mandatory fees, books, supplies, and equipment required for the beneficiary to enroll
and attend an eligible higher educational institution.
- A computer, peripheral computer equipment, software, and internet access while enrolled in
an eligible higher educational institution.
- Room and board, if the beneficiary is enrolled at least half time. Half-time enrollment is
defined as half of a full-time academic semester or term workload. Costs cannot exceed the
allowance for room and board as determined by the eligible higher educational institution.
- Transportation expenses
- Cellphone plans
- Sports and fitness club memberships
- Health insurance
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