Glossary

529 words, in plain English

What the terms on your 529 statements, tax forms and in Launch529 actually mean. General information, not tax advice.

Account owner: The account owner controls the 529. They choose the investments, decide when and how to withdraw, and can change the beneficiary to another family member. The money belongs to the owner, not the student, which is why a 529 usually counts as a parent asset on financial aid forms when a parent owns it.
Adjusted qualified education expenses: Adjusted qualified education expenses are the year's qualified expenses reduced by tax-free educational assistance, such as scholarships and grants, and by any expenses used to claim the American Opportunity or Lifetime Learning credit. A 529 withdrawal is tax-free up to this amount for the same calendar year; anything above it is a non-qualified withdrawal.
Beneficiary: The beneficiary is the student the 529 is for. The account owner can change it to another family member of the beneficiary, such as a sibling, without income tax. That is how money left in one child's account can help another.
Cost of attendance: Cost of attendance (COA) is the estimate each school publishes for a year of study: tuition and fees, housing and food, books and supplies, transportation and personal expenses. Launch529 uses it to project what to save and to set a monthly budget. For off-campus living, the school's allowance for housing and food is also the most a 529 can treat as qualified.
Earnings: Earnings are the investment growth in a 529 beyond what was contributed. Used for qualified expenses they come out tax-free; used for anything else they are taxed as income with the 10% additional tax. Every withdrawal is a mix of contributions and earnings in the same proportion as the account.
Form 1098-T: Form 1098-T comes from the college and reports tuition and related charges and scholarships or grants for the year. It is a starting point for working out qualified expenses and for claiming education tax credits, though it does not show everything that qualifies, such as books or a required computer.
Form 1099-Q: Form 1099-Q is sent by the 529 plan for any year with a withdrawal. It shows the gross amount and the earnings portion, and is issued to the person who received the money (the owner or the beneficiary). You do not file it, but you keep it with your receipts to show the withdrawal was matched by qualified expenses.
Housing and food allowance: Students living in school housing can use the 529 for what the school charges. A student living off campus can use it for rent, utilities and food only up to the room-and-board allowance the school publishes in its cost of attendance. Anything above it is not qualified.
K-12 limit: Beginning in 2026, a 529 can pay up to $20,000 a year per beneficiary for tuition at an elementary or secondary school, plus curriculum and books, tutoring, standardized test fees, online learning materials, dual enrollment and certain therapies. States decide separately whether to treat these withdrawals as tax-free, and some tax them.
Non-qualified withdrawal: A non-qualified withdrawal is money taken out of a 529 for something that is not a qualified expense. What you put in comes back untouched, but the earnings part is taxed as income and usually carries an additional 10% tax. Exceptions include a scholarship (the tax-free amount, without the 10% tax), the student's death or disability, and attendance at a military academy.
Paid from the 529: When the 529 pays the school or seller directly, there is nothing to reimburse. Launch529 marks these expenses as paid from the 529 and keeps them in your records, so the year's withdrawals and expenses can be compared.
Qualified expense: A qualified expense is a cost the IRS lets a 529 pay tax-free: tuition and fees, books, supplies and equipment the school requires, a computer and internet access used for school, and room and board for a student enrolled at least half time (up to the school's published allowance if living off campus). Before college, K-12 tuition and a list of related costs qualify up to $20,000 a year per student. Transportation, application fees and most extracurriculars do not.
Reimbursable: An expense is reimbursable in Launch529 when it is qualified, approved, has its receipt, and was paid by a parent or the student rather than directly from the 529. It stays reimbursable until a request for it is received.
Reimbursement: A reimbursement is a withdrawal that pays you back for a qualified expense you already paid yourself. The withdrawal and the expense should fall in the same calendar year, and you keep the receipts. Launch529 tracks who was out of pocket (the student or a parent), gathers approved expenses into one request, and follows it until the money arrives.
Roth IRA rollover: Under federal law, up to $35,000 over the beneficiary's lifetime can move from a 529 to the beneficiary's Roth IRA, tax-free and penalty-free. The 529 must have been open at least 15 years, contributions from the last five years can't be moved, and each year's rollover is limited by the annual IRA contribution limit. The beneficiary needs earned income at least equal to the amount rolled over.
Student loan repayment: A 529 can repay up to $10,000 of qualified student loans over a lifetime for the beneficiary, and a further $10,000 for each of the beneficiary's siblings. Some states do not follow this federal rule.