529 Plans: Qualified and Non-qualified Expenses

 
 

You’ve put in the hard work of saving for college, and now it’s time to start using those 529 plan assets to help with a family member’s education-related costs. But before you begin withdrawing those funds, it’s important to understand the difference between qualified and non-qualified expenses.

The charts below provide an overview of some of the most common qualified and non-qualified expenses.

Qualified Expenses

Xnip2021-09-07_08-43-56.jpg

Non-Qualified Expenses

Xnip2021-09-07_08-48-11.jpg

Please note: Just because an expense is non-qualified, it doesn’t mean the 529 plan funds cannot be considered a source of payment. The main consequence of paying non-qualified expenses from the 529 plan is that the gains portion of that distribution will be taxed, and it could be assessed a 10 percent penalty.

For more information on 529 plans (referred to as “Qualified Tuition Programs”), and for examples of tax and coordination calculations, see the Qualified Tuition Programs section of IRS Publication 970.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer. © 2021 Commonwealth Financial Network®

 
Saving, ParentingKimberly Modunocollege, saving, 529, 529 plan, kansas city, college savings