![]() However, the account owner would still be liable for income tax on earnings. There are some special situations where non-qualified withdrawals can be made without incurring the additional 10% penalty on earnings. Expenses used to claim the American Opportunity Tax Credit (AOTC) or Lifetime Learning Credit – Expenses used to generate the AOTC or Lifetime Learning Credit must be excluded from qualified expenses.Insurance – Health insurance and medical expenses do not qualify.Electronics – Projectors, home theater equipment, photocopiers and other electronics primarily used for entertainment are not qualified unless they are specifically required by the school for enrollment or attendance.Student loans – You cannot pay back student loans using 529 savings.Sports and activity fees – Fees for extracurricular activities, even if the beneficiary has – for example - a sports scholarship and has to play, cannot be reimbursed with funds from a 529 account.Travel – Transportation costs to and from the school do not qualify cars, airfare, gas, etc. ![]() Be sure to know what these are, as claiming a non-qualified expense may leave you exposed to tax penalties on earnings. The definition of a qualified expense is intentionally broad, but there are some common expenses that do not qualify. This includes transportation costs, which are generally not considered a qualified expense, as well as equipment such as a wheelchair or prosthetics. Now account owners can reimburse themselves for a laptop and printer without a worry.įinally, if the beneficiary has a disability, certain special needs services and equipment needed for enrollment or attendance may qualify. This is a recent change for the benefit of 529 account owners, whereas previously the school had to specifically require these items. Third, computers, peripheral equipment, computer software, and internet access charges are now all considered qualified expenses. The beneficiary must be enrolled at least half-time for room and board expenses to qualify regardless of whether they are on- or off-campus. So if the total cost living off-campus exceeds the school’s allowance, the student would have to pay the difference using funds from another source. To be considered qualified, these costs must be less than or equal to the room and board allowance from the college’s cost of attendance figures (the school’s financial aid department can provide you with these) or the actual amount charged by the school if living in campus housing. Second, room and board, which includes the costs of rent (whether living on or off-campus), and food. They are lumped together because these are all expenses that must be required for enrollment or attendance at the institution. ![]() First, Tuition, fees, books, supplies, and equipment are all qualified expenses. There are four main categories that constitute qualified expenses. ![]()
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