ARTICLE TAKEAWAYS
- What education expenses are generally considered qualified
- Tax implications if distributions are used for nonqualified expenses
- Who is responsible for confirming an expense is qualified
Generally, qualified education expenses are expenses incurred by a beneficiary while attending an educational institution. The CollegeAmerica 529 account owner or beneficiary is responsible for confirming an expense is considered qualified. Owners and beneficiaries should review IRS Publication 970, Tax Benefits for Education for more information on what the Internal Revenue Service (IRS) considers qualified education expenses. For higher education expenses, visit the Federal Student Aid website and use the Federal School Code Search to verify the school is an eligible educational institution by confirming it has a federal school code.
Note: Keep any receipts and documentation for tax preparation to prove your distributions were used for qualified expenses.
The following expenses are generally considered qualified:
Higher education
- Tuition and mandatory fees
- Required books, supplies and equipment
- The following computer technology equipment*:
- Computers or peripheral equipment (such as printers)
- Computer software
- Internet access and related services
* Must be used primarily by the beneficiary during the time enrolled at the eligible higher education institution.
- Room and board for the time the beneficiary is enrolled at least half-time in a degree, certificate or other program (program must lead to a recognized educational credential)
- For students living off campus: Money may be used to pay up to the amount determined by the school for the room and board allowance for students who live off campus in its cost of attendance for the academic term.
- For students living with a parent or guardian: Money may be used to pay up to the amount determined by the school for the room and board allowance for students who live with a parent or guardian in its cost of attendance for that academic term.
- Services for a beneficiary with special needs
Note: You can use your CollegeAmerica account for undergraduate and graduate school as well as specialized programs, such as medical or law school.
Student loans
Money may be used to repay a student loan of the designated CollegeAmerica beneficiary or their sibling (up to $10,000 over their lifetime).
Kindergarten through 12th grade
Money may be used for tuition for an elementary or secondary public, private or religious school (up to $10,000 during the taxable year per beneficiary). Home school expenses are not considered a qualified education expense.
Apprenticeship programs
Money may be used for the following expenses associated with apprenticeship programs registered and certified with the Secretary of Labor under Section 1 of the National Apprenticeship Act:
- Fees
- Books
- Supplies
- Equipment
Tax implications when money is used for non-qualified expenses
If money in a 529 account is used for purposes other than qualified education expenses, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. States take different approaches to the income tax treatment of distributions. For example, a distribution for K–12 expenses may not be exempt from state tax in certain states. Consult with a tax advisor for state-specific details and review the CollegeAmerica Program Description (PDF) for more information.