What You Can Actually Spend 529 Money On

529 plans cover tuition, room and board, and required fees at any accredited college or university

A 529 plan lets you withdraw money tax-free for may have access to education expenses at any school that participates in federal student aid programs. That includes four-year universities, community colleges, trade schools, and graduate programs. The money can pay tuition, required fees, room and board (if the student is enrolled at least half-time), and books or supplies the school requires.

The key word is "required." If your child's college says a laptop is mandatory for the program, you can pay for it from the 529. If it's optional, you cannot. The school's financial aid office can tell you which items count as required.

You can also use 529 money to pay for room and board off-campus, as long as the cost does not exceed what the school charges for on-campus housing. If your child rents an apartment for $800 a month but the college's dorm costs $600 a month, you can only withdraw $600 a month from the 529.

Key Takeaways

• 529 money covers tuition, required fees, room and board, and required books or equipment at any accredited college, university, trade school, or graduate program.
• Room and board expenses must not exceed what the school charges for on-campus housing, even if your child lives off-campus.
• You can withdraw up to $35,000 per beneficiary over a lifetime to pay back student loans or fund a Roth IRA, under rules that took effect in 2024.
• Money spent on expenses that are not may have access to — such as optional laptops, meal plans beyond room and board, or transportation — triggers income tax and a 10 percent penalty on the earnings portion.
• K-12 tuition at private schools and up to $35,000 in student loan repayment are the only non-college uses allowed without penalty.

What happens if you use 529 money for something that does not count

If you withdraw money for an expense the IRS does not consider may have access to, you pay income tax on the earnings portion of that withdrawal, plus a 10 percent penalty on those earnings. The principal (the money you originally deposited) comes out tax-free, but the growth does not.

Example: You put $10,000 into a 529 and it grows to $12,000. You withdraw $2,000 to buy your child a laptop that the school did not require. The $1,000 in earnings gets taxed as income, plus you owe a 10 percent penalty ($100). You pay tax on $1,000 at your ordinary income tax rate, which varies by your tax bracket.

The penalty applies only to the earnings, not to the full withdrawal. But the tax bill can still be substantial, especially if you have a large account balance and the money has grown significantly.

K-12 private school tuition and student loan repayment without penalty

Two non-college uses avoid the 10 percent penalty. You can withdraw up to $35,000 per beneficiary over a lifetime to pay back federal or private student loans. You can also use 529 money to pay tuition at a private K-12 school (kindergarten through 12th grade), up to $35,000 per year per child.

The $35,000 student loan repayment limit is a lifetime cap per beneficiary, not per year. Once you have used $35,000 for loan repayment, you cannot use the 529 for that purpose again for that child. The K-12 tuition limit is $35,000 per year, so you can use it every year your child attends private school.

Both of these uses still require you to pay income tax on the earnings portion of the withdrawal — the penalty is waived, but the tax is not. If you are in a lower tax bracket than when you made the deposits, the tax bill will be smaller.

Expenses that do not count and will trigger the penalty

The IRS has a specific list of what qualifies. Anything outside that list triggers the penalty. Common expenses that do not count include:

• Transportation or commuting costs (gas, parking, plane tickets home)
• Optional equipment or supplies (a laptop if the school does not require it, a car, a phone)
• Meal plans beyond room and board (if the school bundles meals into housing, you can use 529 money; if meals are separate, they do not count)
• Health insurance or medical expenses
• Fraternity or sorority dues and housing
• Extracurricular activities, sports fees, or club memberships
• Rent for housing during breaks or summers when the student is not enrolled

If you are unsure whether an expense counts, contact the school's financial aid office. They can tell you whether the item is required and whether it falls within the school's cost of attendance for financial aid purposes.

How to know what your specific school allows

Each school publishes a "cost of attendance" figure that the financial aid office uses to calculate loans and grants. This number includes tuition, fees, room and board, books, and supplies. Expenses within that number are generally safe to pay with 529 money. Expenses outside it are not.

You can find the cost of attendance on the school's financial aid website, or call the financial aid office directly. They can also tell you which specific items they consider required versus optional. Some schools require a meal plan; others do not. Some require a computer; others do not. The rules vary by institution.

Keep receipts and documentation for any 529 withdrawal. If the IRS ever questions whether an expense was may have access to, you will need proof of what you paid for and that it was required by the school.

Using 529 money at graduate and professional schools

529 plans cover graduate school tuition, fees, room and board, and required books or equipment at any accredited graduate or professional program — law school, medical school, MBA programs, master's degrees, and doctoral programs all count. The same rules apply: the expense must be required by the school, and room and board cannot exceed the school's on-campus housing cost.

Graduate students who live off-campus should check with their school's financial aid office about the housing cost cap. Graduate housing costs often differ from undergraduate housing, and the cap is based on what the school charges for graduate housing specifically.

Changing beneficiaries and rolling money to a Roth IRA

If your child does not use all the 529 money, you have options. You can change the beneficiary to another family member — a sibling, a cousin, even yourself if you plan to return to school. The money stays in the account and keeps growing tax-free.

Starting in 2024, you can also roll up to $35,000 from a 529 into a Roth IRA for the same beneficiary, as long as the 529 account has been open for at least 15 years. This is a one-time move per beneficiary. The rollover counts toward the annual Roth IRA contribution limit, so if the limit is $7,000 that year, you can only roll $7,000 even if you have more available.

If you do neither of these things and simply withdraw the leftover money for non-may have access to expenses, you will owe income tax and the 10 percent penalty on the earnings portion.

Frequently Asked Questions

Can I use 529 money to pay for housing during summer break?

No, not unless your child is enrolled in summer classes. Room and board expenses only count when the student is enrolled at least half-time. If your child is home for the summer and not taking courses, housing costs during that period do not may have access to. Check with the school's financial aid office if your child is taking even one summer course — some schools count that as enrollment for housing purposes.

What if my child gets a scholarship — can I still use the 529?

Yes, but you need to be careful. If you withdraw 529 money for an expense that the scholarship also covers, you owe the 10 percent penalty on the earnings portion of that withdrawal. The best approach is to use the 529 for expenses the scholarship does not cover, or to withdraw only the amount that exceeds the scholarship. Talk to the financial aid office about what the scholarship covers before you make withdrawals.

Does a 529 cover room and board if my child lives at home?

Only if the school considers living at home as part of its cost of attendance and includes a housing allowance in that figure. Some schools do; many do not. If the school does not assign a housing cost to students living at home, you cannot use 529 money for that. Call the financial aid office and ask whether they include a housing allowance for students living with family.

Can I use 529 money to pay for a computer my child needs for online classes?

Only if the school requires it. If your child's program requires a specific laptop or computer, and the school lists it as a required expense, you can pay for it with 529 money. If the school says a computer is recommended but not required, or if your child chooses to buy one on their own, the 529 cannot cover it without triggering the penalty. Ask the school in writing whether a computer is required for your child's specific program.

What if I withdraw money and later find out it was not a may have access to expense?

You can request a correction from the 529 plan administrator if you discover the error within a certain timeframe — usually 60 days. They can recharacterize the withdrawal and help you avoid the penalty. If you miss that window, you will owe the tax and penalty when you file your tax return. This is another reason to keep detailed records and confirm with the school before you withdraw.