Man standing at laptop computer with paper documents529 accounts such as the U.Fund College Investing Plan allow you to save for college expenses while taking advantage of benefits not available in other savings plans. 529 accounts are easy to open, only require a small initial deposit, 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
  • Books
  • 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.

Using 529 plan funds

529 plan funds may be used for qualified expenses at any college or university that accepts federal financial aid funds. 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.

Until recently, 529 plans were for the sole use of expenses at colleges, universities, and technical/vocational schools. New tax guidelines as part of the 2018 Tax Cuts and Jobs Act changed the regulations to now allow 529 fund use for K-12 tuition expenses.

Per the IRS:

As of 2018, the term “qualified higher education expense” includes up to $10,000 in annual expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.  

You can learn more about how the Tax Cuts and Jobs Act will affect your family by reviewing our recent blog post here.  And for more information about 529 plans and qualified education expenses, check out the IRS newsroom.