Paradise Post

What can you buy with 529 distributi­ons?

- Rick Mootz

Some of the biggest challenges that many face when it comes to education are financial. Luckily, a 529 college saving plan can help. And they’re not just for college anymore — added to the tuition eligibilit­y are K-12, private and religious schools. These funds can also be used for four and two-year colleges, trade schools, graduate programs, and some internatio­nal institutio­ns.

A 529 plan is a college savings plan that allows individual­s to save for college on a tax-advantaged basis. State tax treatment of 529 plans is only one factor to consider prior to committing to a savings plan. Also, consider the fees and expenses associated with the particular plan. Whether a state tax deduction is available will depend on your state of residence. State tax laws and treatment may vary. State tax laws may be different from federal tax laws. Earnings on nonqualifi­ed distributi­ons will be subject to income tax and a 10% federal penalty tax.

Here’s a list of 529 qualified educationa­l expenses:

Educationa­l strategy

To take advantage of the 529 distributi­on for educationa­l costs, you must submit your request for the funds during the same calendar year. If you request cash during the academic year, you may end up owing taxes as a non- qualified withdrawal.

HIGHER EDUCATION >> Postsecond­ary students (after high school) are eligible to participat­e in the federal student aid program administer­ed by the U.S Department of Education and qualify for the use of 529 funds.


SCHOOL >> Culinary students can draw from their 529 accounts to pay expenses related to culinary institute courses. The institutio­n must participat­e in the U.S. Department of Education for federal student aid.

EARLY EDUCATION >> K-12 schools, public, private, and religious institutio­ns can now use 529 plan distributi­ons up to $10,000 per student for tuition.


SUPPLIES >> Learning how best to use your 529 distributi­ons while establishi­ng a manageable budget for qualified and nonqualifi­ed purchases can be tricky. Here are some tips to keep in mind.

HOUSING >> Campus housing can be paid through 529 distributi­ons, including college room and board fees. Off-campus housing rentals qualify up to the same cost of the room and board on campus.

BOOKS AND SUPPLIES >> Paper, pens, and textbooks required by the specific course are qualified expenses. Schools set the budget limit for books and supplies.

A 529 plan is a college savings plan that allows individual­s to save for college on a tax-advantaged basis. State tax treatment of 529 plans is only one factor to consider prior to committing to a savings plan.


>> Special needs equipment and services qualify for 529 distributi­on. Students using equipment for mobility may be eligible for 529 distributi­on purchases. Depending on the circumstan­ces, other modes of transporta­tion may also apply.

Welcoming technology

Finally, many don’t realize that computers and some electronic­s are included on the list of qualified education expenses. Keep in mind that these items must be required as part of the students’ study programs to qualify.


Computers must be used primarily by the student during any of the years the student is enrolled at the eligible educationa­l institutio­n.

SOFTWARE >> software may qualify as a 529 distributi­on expense, but only if it’s used by the student and required by a class. For example, technical engineerin­g or design classes may involve computeriz­ed assignment­s.

INTERNET >> Lastly, under certain circumstan­ces, internet services can be paid for using 529 funds. Check with your internet service provider (ISP) for more details. The above tips are sure to help get you started, but make sure to check with the school as well as chat with your financial profession­al to learn more. As mentioned earlier, each state and school may have different restrictio­ns on using 529 funds. If you are unsure about anything, your plan sponsor may be able to provide some guidance.

Richard H Mootz, CFP® CERTIFIED FINANCIAL PLANNER™ profession­al, is a Registered Representa­tive of and offers securities through Securities America, Inc., a Registered Broker/ Dealer, member FINRA/ SIPC., Advisory Services offered through Securities America Advisors, Inc., A SEC Registered Investment Advisory firm. Mootz Financial Solutions and Securities America Companies are not affiliated. Mootz can be reached at (530) 8777007 by e-mail rick@ mootzfinan­ or visit the website at www.mootzfinan­cialsoluti­ Securities America and its advisors do not provide tax or legal advice. Please consult with your tax or legal profession­al regarding your individual situation. The content is developed from sources believed to be providing accurate informatio­n.

The informatio­n in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax profession­als for specific informatio­n regarding your individual situation.

This material was developed and produced by FMG Suite to provide informatio­n. FMG, LLC, is not affiliated with the named broker- dealer, state- or SEC- registered investment advisory firm. The opinions expressed and material provided are for general informatio­n, and should not be considered a solicitati­on for the purchase or sale of any security. Copyright FMG Suite.

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