529 Qualified Expenses: What Can You Use 529 Money For?

A 529 plan is a powerful tool for saving for education that offers tax-free withdrawals on qualified expenses. You can use a 529 plan for tuition, fees, books, computers, room and board, student loans (up to $10,000), and K-12 tuition (up to $10,000 per year), with each subject to specific guidelines.

However, not all education expenses qualify for free withdrawals, and misusing 529 plan withdrawals can result in penalties. Understanding which costs qualify—and which don’t—can help you maximize your savings.

Today, we’ll cover an updated list of qualified education expenses, examples of non-qualified expenses, and what to do if you spend funds on a non-qualified expense. 

Let’s get started!

What you can pay for with a 529 plan

First off, let’s dive into the qualified expenses of a 529 plan.

Qualified higher education expenses include costs required for enrollment or attendance at a college, university, or other eligible post-secondary educational institution. The definition of qualified higher education expenses (for 529 plan purposes) also includes up to $10,000 per year in tuition for K-12 schools and up to $10,000 in student loan repayments.

Here is a list of qualified educational expenses, along with other common educational expenses that are not qualified:

It’s worth noting the rules for some of these expenses are a bit more complicated than others. 

Let’s break down each expense.

529 Qualified Expenses

These expenses are usually considered qualified education expenses for 529 plan funds, with a few exceptions. 

Tuition and fees

The funds you accumulate in a 529 plan can be used to pay the full amount of your tuition and fees for:

• College 
• University
• Vocational and trade school
• Public, private, or parochial elementary and secondary school

Attendance does not necessarily need to be physical. You can also use a 529 plan to pay for online college courses. 

As long as the college you’re enrolling in is an eligible institution (which means that the institution is eligible for Title IV federal student aid), you can use a 529 plan to pay for online tuition and fees.

But a 529 plan isn’t limited to just college or trade school tuition fees. 

Thanks to the Tax Cuts and Jobs Act of 2017, families can also use a 529 to pay for up to $10,000 worth of tuition expenses per year at an elementary or secondary school. This includes public, private, and parochial schools.

Books and supplies

If books and supplies are required for participation in a class, the full cost of those items is considered a qualified expense. This may include course textbooks, lab materials, safety equipment, or any other mandatory items required for your coursework.

By contrast, you can’t claim books and supplies that aren’t required as part of the class.

Computers, software, and internet access

You can use your 529 plan to purchase a computer, “peripheral equipment” (like a mouse or speakers), computer software, or internet access. 

According to the Internal Revenue Service (IRS), computers and internet access are considered qualified education expenses as long as the beneficiary primarily uses that hardware (or internet access) while enrolled in an eligible institution.

It’s important to note that the IRS specifically states that computer software that has nothing to do with your studies doesn’t count as a qualified expense. That means computer games, sports software, or any apps related to a hobby can’t be paid for using a 529 plan. 

Room and board at college

You can use a 529 plan to pay for qualified room and board expenses, including on-campus housing, off-campus rent, and meal plans, as long as the beneficiary is enrolled at least half-time.

For off-campus housing, qualified expenses are limited to the college’s cost of attendance allowance. Room and board for approved study-abroad programs and summer rent for half-time students also qualify. Note that prepaid tuition plans cannot be used for room and board expenses.

Special needs equipment

Special needs equipment refers to services necessary for students with disabilities or other special needs to attend college or university. If you genuinely require special needs equipment to enroll and participate in a course at an eligible institution, you can meet these costs with your 529 plan.

Families with special needs may also consider using a 529 ABLE account to save for college and other education expenses.

Student loan repayment

529 plans don’t have any time limits. If you have leftover money in your 529 college savings plan after you graduate, you can use that money to pay off all or part of your student loan debt.

Note that there is a lifetime limit of $10,000 in qualified student loan repayments that can be made using your 529 plan.

Funding a beneficiary-owned Roth IRA

As of 2024, the SECURE Act 2.0 expanded the definition of qualified 529 expenses to include transfers of leftover funds to a beneficiary’s Roth IRA. Under this new provision, you can transfer up to $35,000 tax-free and penalty-free to a beneficiary’s Roth IRA if you meet certain requirements.

Not all states follow the federal definition of qualified expenses for 529 plans. Check your state’s definition of qualified 529 expenses to be aware of any potential state tax penalties caused by a 529 to Roth IRA rollover. 

529 non-qualified expenses

The following expenses are typically considered non-qualified, except under specific circumstances:

• Transportation and travel costs: Expenses such as gas, transit passes, vehicle rental, maintenance, or purchasing a car are generally not qualified expenses. The only exception occurs if your college explicitly includes transportation fees within a comprehensive tuition fee or identifies them as required for enrollment or attendance.
• Health insurance: Typically, you cannot use a 529 to pay for health insurance. However, if your institution requires health insurance as part of a comprehensive tuition fee or explicitly states that it is mandatory for enrollment or attendance, it may qualify.
• College application and testing fees: Any fees associated with college applications or standardized tests, incurred before official enrollment, do not qualify.

Conclusion

529 plans play an important role in your college savings plan, but you’ll make the most of them if you understand 529 qualified expenses and how to prove them.