What does a 529 plan covered expenses

Transportation and travel costs. No, costs associated with transportation to and from campus, such as airfare or gas, are not qualified education expenses. Health insurance. College application and testing fees. Student loans. Wondering how your plan may impact financial aid? That means the funds you accumulate in a plan can be used to pay the full amount of your college tuition fees and most subsequent university fees that are required for you to enroll and attend.

Attendance does not necessarily need to be physical. You can also use a plan to pay for online college courses. This includes public, private, and parochial schools. Tuition costs at many trade schools are also considered qualified plan expenses, meaning you can withdraw the money tax-free from a plan to pay those costs. If books and supplies are required to participate in a class, the full cost of those books and supplies are considered a qualified expense.

This may include course textbooks, lab materials, safety equipment, or anything else that is absolutely mandatory for your coursework. A college savings plan can be used to pay for some qualified room and board expenses like rent or other housing costs. First, you can use a plan to pay for off-campus and non university-managed accommodation as long as the beneficiary is enrolled in an eligible college program on at least a half-time basis. That student must also be studying towards a degree, certificate, or another recognized credential.

Any amount above the allowance is considered a non-qualified plan expense. Studying abroad? Rent incurred during the summer months is also considered qualified when the student is enrolled at least half-time. While a college savings plan can be used to pay for room and board in some instances, Prepaid tuition plans like the Private College Plan generally cannot be used to pay for room and board.

That means if your family is using a prepaid tuition plan, you might want to think about setting up a college savings plan so that you can save for extra expenses like room and board. Special needs equipment refers to services that are necessary for a student with disabilities or other special needs to attend college or university. If you genuinely require special needs equipment to enroll and participate in a course at an eligible institution, these costs can be met using your plan.

Again, a plan can only be used to help pay for special needs services if the costs were incurred in connection with enrollment or attendance at a qualified college or university.

Families with special needs may also consider using a ABLE account to save for college and other education expenses. Transportation and travel costs , like gas and transit passes, are generally not considered qualified plan expenses. That means you cannot use a plan to buy or rent a car, maintain a vehicle or pay for any other travel cost. While the rules cover a large range of education costs, "Some expenses that people assume are qualified may not be," says Richard Polimeni, director of Education Savings Programs at Bank of America.

It's important to know the difference. Money from a account can be used for major post-secondary education costs such as:. Here's where things may get confusing. But as far as the tax law is concerned, expenses such as gas, parking and airfare are considered nonqualified expenses. Likewise, pre-enrollment expenses such as test prep courses, are, unfortunately, ineligible. So is health insurance, even if purchased through the school. Costs of extracurricular activities, from ballet lessons to membership dues at a sorority or fraternity, are also not eligible.

There are plenty of options: Use the extra funds for that student's graduate school, designate a new beneficiary from among certain members of the designated beneficiary's family , or even name yourself.

The same tax and other benefits apply so long as the money is used for qualified education expenses. Related Questions What happens to a Plan if it's not used? Can my child benefit from more than one account? What happens to a Plan if it's not used? Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. Connect with us:. Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.

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Qualified vs. Nonqualified Expenses Footnote 1. Fees, books, supplies and equipment for participation in a registered and certified apprenticeship program. Here are your options on how to use your Ohio college savings plan with scholarships.

As the account owner, make sure to retain all documents of your plan expenses and withdrawals. You have the burden of proof for tax purposes. You also have the option to transfer the funds to another beneficiary who is related to your child — including siblings, stepsiblings, parents, stepparents, cousins, grandparents, nieces and nephews — to avoid tax penalties.

If you are thinking about continuing your own higher education, you can make yourself the new beneficiary of the college savings account. Another alternative is to withdrawal the exact amount of the scholarship from the plan. As a non-qualified withdrawal, the earnings portion of the withdrawal will be subject to federal and state taxes. However, there are three exemptions for plans, with one being for receiving a scholarship.

FAFSA will determine how much financial aid your child may receive. The form will require you to list assets you have, which will include your Ohio college savings account.

The good news is the maximum that your account will counted is up to 5. If you have a account, keep on saving for college. And remember, your plan will have a minimal effect on their chances of receiving federal financial aid. A account can be used for whatever comes after high school.