What Can I Use My 529 Funds For?
529 accounts such as the U.Fund College Investing Plan allow you to save for college expenses (and K-12 tuition) while taking advantage of benefits not available in other savings plans. 529 accounts are easy to open, have no minimum balance requirement, and allow you to decide how to invest your funds. And you can withdraw your 529 funds tax free when using them to pay for qualified educational expenses.
What are qualified education expenses?
Broadly speaking, these are expenses related to enrollment or attendance at an eligible college or university. These may include:
- Tuition and fees
- Room and board (if the student is attending at least half time)
- Technology (computer and internet service) if it is necessary for the student's education
One popular misconception is that you can withdraw 529 funds tax free to pay for transportation. This is not a qualified expense. Whether plane tickets, a subway pass, or a new car, transportation expenses are NOT considered qualified educational expenses.
Qualified education expenses also include up to $10,000 in annual expenses for tuition in connection with enrollment or attendance at an elementary or secondary (K-12) public, private, or religious school.
In addition, thanks to the SECURE Act, 529 funds can be used tax free to pay back student loans (up to $10,000 in total) and for textbooks, fees, and equipment related to apprenticeship programs.
Using 529 plan funds
For higher education, 529 plan funds may be used for qualified expenses at any college or university that is eligible to participate in a student aid program administered by the U.S. Department of Education. This includes pretty much every accredited school in the country, and several institutions abroad. To find out if a college or university accepts federal financial aid funds, check to make sure the school has a federal school code in the database here.
If you have a U.Fund, you can learn more about spending your 529 funds on Fidelity's webpage here. And don't yet have a U.Fund but interested in starting one? Begin here.