What Are Qualified Educational Expenses?

Qualified educational expenses, also known as QEEs, refer to the costs associated with higher education that can be paid for using funds from a 529 plan without incurring taxes or penalties. These expenses typically include tuition, fees, books, supplies, and certain room and board costs incurred while the beneficiary is enrolled at an eligible educational institution.

Tuition and Fees:

Money from a 529 plan can be used to pay for tuition at eligible colleges, universities, and vocational schools which can even cover certain apprenticeship programs and related expenses. Some 529 plans allow funds to be used for K-12 tuition expenses, up to a certain limit.

This includes fees required for enrollment and attendance at an eligible educational institution.

Room, Board, and Transportation:

Funds can be used for room and board expenses for students who are enrolled at least half-time. This includes on-campus and off-campus housing costs. Some states have expanded the use of 529 plans to include transportation.

Books, Technology, and Supplies:

Funds from a 529 plan can also be used to purchase required textbooks, supplies, and equipment necessary for coursework. This may include laptops, software, lab equipment, and other educational materials.

With the increasing reliance on technology in education, expenses related to computers, internet access, and other technology tools may qualify as educational expenses under a 529 plan. This can include purchasing a computer, printer, software, or internet service required for coursework.

Special Needs Services:

If the beneficiary has special needs, certain expenses related to education and training may be considered qualified educational expenses. This can include the costs of tutors, therapists, adaptive equipment, and other services designed to assist with learning or development.

Study Abroad Programs:

Expenses associated with approved study abroad programs can often be covered by a 529 plan. This includes tuition, fees, books, supplies, and room and board costs incurred while participating in an eligible study abroad program.

Student Loan Repayment:

Recent changes to federal legislation allow tax-free withdrawals of up to $10,000 per beneficiary for qualified student loan repayments. This provision applies to both federal and private student loans, offering families additional flexibility in using 529 plan funds.

Non-Qualified Expenses:

While 529 plans offer significant tax advantages for qualified educational expenses, it’s essential to understand that not all expenses are eligible for tax-free withdrawals. Expenses such as insurance, student loan interest, and certain extracurricular activities are generally considered non-qualified expenses.

Check with your plan administrator for specific details about QEE.