529 Plan Qualified Expenses: What a 529 Can Be Used For

A 529-qualified expense is an expense that can generally be paid with a distribution from a 529 college savings plan without federal income tax on the earnings portion of the withdrawal. Although 529 plans are closely associated with college tuition, federal law allows the money to cover a broader range of education costs. Recent changes have expanded eligible expenses to include K-12 education and certain postsecondary credential programs.

Do you need help with creating or managing a 529 plan? Consider talking it over with a financial advisor today.

What Are 529 Plan Qualified Expenses?

529 plan funds can generally be withdrawn tax-free when the money is used to pay qualified expenses for the beneficiary. For college and other eligible postsecondary schools, those expenses can include some of the largest costs associated with attendance.

Tuition and fees: Tuition and required fees at an eligible postsecondary institution can qualify. Eligible schools generally include colleges, universities, vocational schools and other institutions that participate in federal student aid programs.
Books and supplies: Books, supplies and equipment required for enrollment or attendance can qualify.
Technology: Computers, related equipment, software and internet access can qualify when they are used primarily by the beneficiary while enrolled.
Functional needs services: Certain services required by a beneficiary with support needs in connection with enrollment or attendance can qualify.
Room and board: These costs can qualify when the beneficiary is enrolled at least half-time. For students living off campus, the eligible amount cannot exceed the school’s room-and-board allowance. If the student lives in school-owned or operated housing, the actual amount charged by the school can qualify.

It’s necessary to coordinate tax-free 529 withdrawals with other education benefits. For example, you cannot use the same expenses to support a tax-free 529 distribution generally as you do to claim the American Opportunity Tax Credit or other education tax benefit. Tax-free scholarships and certain other assistance can also reduce the expenses available to support a tax-free 529 withdrawal.

529 Plan Qualified Expenses Beyond College

The list of expenses eligible for 529 treatment has expanded beyond traditional higher education costs. With recent changes, K-12 students can now use 529 money for tuition as well as curriculum materials, instructional books, online learning resources, certain tutoring, specified academic and admissions tests, dual-enrollment charges and eligible disability-related educational services. As of 2026, a beneficiary can use up to $20,000 annually from 529 accounts for qualifying elementary and secondary school costs.

529 funds can also cover certain costs associated with registered apprenticeship programs, including required fees, books, supplies and equipment. It’s possible to use up to $10,000 over an individual’s lifetime toward principal or interest on qualified student loans of the beneficiary. A separate $10,000 limit applies for each of the beneficiary’s siblings. Student loan interest paid with a tax-free 529 distribution cannot, however, also count for the student loan interest deduction.

Another recent expansion covers recognized postsecondary credential programs. Qualifying costs can include tuition, fees, books, supplies and equipment required for participation. Certain testing expenses necessary to obtain or maintain a recognized credential are also eligible.

529 Plan Qualified Expenses: What Doesn’t Count

Not every expense associated with attending college qualifies for tax-free 529 treatment. Expenses that are not eligible include:

Transportation costs: Travel between home and college generally does not qualify as a higher education expense under the 529 rules.
Insurance and medical expenses: Health insurance, medical bills and similar personal expenses generally aren’t qualified higher education expenses.
Optional activities: Costs for clubs, entertainment and other activities that aren’t mandatory for enrollment or attendance generally don’t qualify.
Expenses above eligible room-and-board limits: For students living off campus, housing and food costs above the applicable amount established by the school aren’t qualified expenses.

529 Plan Withdrawal Rules

Matching withdrawals to eligible expenses is important when taking money from a 529 account. Records, such as tuition statements, receipts, invoices and housing documentation, can help establish where money is spent.

A 529 plan generally issues Form 1099-Q after a distribution. The form separates the total distribution into earnings and basis, or the portion attributable to contributions. The tax treatment of withdrawals depends in part on whether the beneficiary had sufficient adjusted qualified education expenses to support the tax-free distribution.

Expenses used for other tax-free education benefits generally cannot also support a tax-free 529 withdrawal. Keeping records of scholarships, education credits and 529 distributions can therefore be particularly important when several sources are paying the same student’s costs.

What Happens If You Pay for Nonqualified Expenses?

When a 529 distribution exceeds the beneficiary’s adjusted qualified education expenses, the earnings attributable to the non-qualified portion are generally included in taxable income. An additional 10% federal tax can also apply to those taxable earnings, though federal law provides exceptions to the additional tax in certain circumstances. The contributions themselves aren’t taxed again because they were made with after-tax money.

For example, assume you contributed $14,000 to a 529 account. Investments increased the account’s value to $20,000. Contributions would represent 70% of the account, and earnings 30%. If you then take a $10,000 non-qualified distribution, $3,000 of that amount would represent earnings. You would need to include that earnings portion in taxable income. That amount may also be subject to the 10% additional federal tax.

State consequences can vary when withdrawals apply towards an expense the state does not recognize as qualified. A state may impose its own tax treatment or recapture a deduction or credit previously received for contributions.

Alternatives to 529 Plans

A 529 plan offers tax advantages when savings will ultimately go towards eligible education expenses. Other accounts can provide greater flexibility when the future use of the money is less certain.

UTMA account: A UTMA account holds assets for a minor without restricting their use to qualified education expenses. Investment income may be taxable. The assets ultimately belong to the child.
Roth IRA: A Roth IRA is primarily for retirement savings. It’s typically possible to withdraw Roth IRA contributions without tax or penalty. An exception to the 10% additional tax can apply to certain early distributions used for qualified higher education expenses. If withdrawals do not meet requirements for a qualified Roth distribution, though, taxes can apply to earnings withdrawals.
Brokerage account: A taxable investment account has no education-specific spending restrictions. However, investment income and realized gains may create tax liability.
Savings account: A high-yield savings account provides flexibility and avoids market risk. Its long-term return may differ substantially from investments held in a 529 plan, though.

Rolling Unused 529 Money Into a Roth IRA

Even if unused 529 savings remain, it’s not necessary to withdraw them for a non-qualified purpose. Federal law permits the direct transfer of certain 529 funds to a Roth IRA that the the 529 beneficiary owns, without treating the rollover as a taxable distribution.

Several restrictions do apply. For one, the 529 account generally must have existed for at least 15 years. Amounts contributed during the five years preceding the transfer, along with earnings attributable to those contributions, aren’t eligible. Transfers are subject to the annual Roth IRA contribution limit and a $35,000 lifetime limit for each beneficiary. The money also must move through a direct trustee-to-trustee transfer.

Still, this option can provide another use for money left in a 529 after the beneficiary finishes school. This can be particularly relevant when scholarships or lower-than-expected education costs leave a balance in the account.

Bottom Line

Colleges graduates at a graduation ceremony.

529 plans can cover more than college tuition. Eligible uses can include books, equipment, certain technology, room and board, registered apprenticeship expenses, limited student loan repayments and qualifying credential programs. The rules for K-12 expenses have also expanded. Matching withdrawals carefully with eligible expenses can help preserve the federal tax advantages of a 529 plan. If leftover funds remain, a Roth IRA rollover is an option worth exploring.

Tips for Paying for College

A financial advisor can help you identify 529 plan qualifying expenses and map out a financial plan to help pay for your child’s college. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Remember to keep records of all your 529 plan activity including contributions and withdrawals. You’ll have to report this to the IRS come tax time. For your convenience, we’ve reviewed the best tax software out there to highlight the benefits that would shine for different types of taxpayers.