What counts
These are qualified 529 expenses when they are paid for a student enrolled at an eligible school.
Tuition and Fees
e.g. tuition, enrollment fee, registration fee
Tuition and mandatory enrollment fees are qualified 529 expenses when paid to an eligible educational institution.
IRS Publication 970, Chapter 8
Books and Supplies
e.g. textbook, book, course material
Books, supplies, and equipment required for courses are qualified expenses.
IRS Publication 970, Chapter 8
Computer Equipment
e.g. laptop, computer, macbook
Computer equipment, software, and peripherals used primarily by the student during enrollment are qualified expenses. They do NOT need to be required by the school.
IRS Publication 970, Chapter 8
Internet Service
e.g. internet, wifi, broadband
Internet access and service qualify as 529 expenses when used primarily by the student during enrollment.
IRS Publication 970, Chapter 8
It depends
These can qualify, with limits. Check the details before you pay.
Room and Board
e.g. rent, apartment, housing
Room costs qualify, but off-campus housing is limited to the amount in your university's published Cost of Attendance (COA). Check your university's room and board allowance.
IRS Publication 970, Chapter 8 - Room and Board
Student Loan Repayment
e.g. student loan, loan repayment, loan payment
Up to $10,000 lifetime per beneficiary can be used for student loan repayment under the SECURE Act of 2019. Track this limit carefully.
SECURE Act of 2019
What does not count
Paying for these from a 529 makes the earnings taxable and usually adds a 10% penalty.
Transportation
e.g. gas, car, transportation
Transportation costs (gas, car insurance, bus passes, parking, rideshares) are NOT qualified 529 expenses, even for commuting students.
Health Insurance
e.g. health insurance, medical, dental
Health insurance premiums billed separately are NOT qualified. If bundled into mandatory tuition fees, they may qualify as part of tuition and fees.
Extracurricular Activities
e.g. club, fraternity, sorority
Club dues, Greek life fees, and extracurricular activity costs are NOT qualified unless required for a specific course.
Phone / Cell Plan
e.g. phone, cell, mobile plan
Cell phone bills are NOT qualified 529 expenses, even if used for schoolwork.
Furniture / Dorm Decor
e.g. furniture, bedding, decor
Furniture and dorm decorations are NOT qualified expenses. Only housing costs up to the COA allowance qualify.
Why getting it right matters
A withdrawal that does not match a qualified expense is taxed on its earnings, plus a 10% federal penalty. Most mistakes come from assuming something qualifies without checking, or from not keeping records.
Questions about qualified expenses
What can a 529 plan be used for?
Tax-free withdrawals can pay for tuition and mandatory fees, required books and supplies, computers and internet used by the student, and room and board for students enrolled at least half time, up to the school's published cost of attendance. Up to $10,000 of student loans can also be repaid, per person, over a lifetime.
Is a laptop a qualified 529 expense?
Yes. Computers, tablets, software and peripherals used primarily by the student while enrolled qualify, and they do not have to be required by the school.
Does off-campus rent qualify?
Yes, up to the room and board allowance in your school's published cost of attendance. Anything above that allowance is not qualified.
What happens if I pay for something that does not qualify?
The earnings part of that withdrawal is taxed as income and usually carries a 10% federal penalty. Your state may also take back a deduction you claimed. Matching each withdrawal to a qualified expense in the same year is the best protection.
Can I use a 529 and a tax credit for the same expense?
No. The same expense cannot be used for both a tax-free 529 withdrawal and a credit such as the American Opportunity Tax Credit. Coordinate them so each dollar is used once.
Where do these answers come from?
They follow IRS Publication 970 and the SECURE Act. This is general information, not tax advice, and rules can change. Talk to a qualified professional about your situation.