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529 Qualified Expenses: More Than Just Tuition

When it comes to paying for education, a 529 savings plan offers a valuable advantage: you may withdraw contributions tax-free to cover ‘qualified education expenses.’ Qualified expenses include not only college tuition and fees, but also room and board, books and supplies, apprenticeship expenses, K-12 tuition and expenses, and much more.

Tuition & Fees

Times have changed, and so has the cost of tuition and fees at 4-year colleges and universities. According to US News & World Report, in the past 20 years, the cost of college tuition and fees at a private university has risen by 144%; in-state tuition and fees at a public university have jumped by 212%. No wonder parents flinch when they receive that first bill; but, if you have been contributing regularly to a 529 savings plan, you are ready to go. The tuition and fees required to attend a college or university are considered qualified expenses, so you may withdraw funds tax-free on both the state and federal levels. This includes online classes as well. You may withdraw funds at any time from your plan to cover up to the full amount of tuition and fees.

Room & Board

Living expenses are the second largest expenditure for college, after tuition and fees. The average cost of room and board at 4-year institutions ranges from approximately $10,000 to $15,000. Students may live on-campus or off-campus; however, if your student decides to live off-campus (as 87% of students do), your withdrawal is limited to what you would pay for your student to live on-campus. Any amount above that is considered a non-qualified expense. But, rent in the summer is covered, and so is study abroad – as long as the program is approved for credit by the institution. Note that for all these expenses to be deemed qualified, your student must be currently enrolled at least half-time and working towards a degree.

Books & Supplies

According to the College Board, during the 2024-2025 academic year, the average cost of books and supplies was $1,290 for on-campus undergraduate students at a 4-year university. Books and supplies include textbooks, lab materials, safety equipment, and notebooks – anything that is mandatory for student courses. These too are considered qualified expenses, and money required to pay for all of these materials can be withdrawn from your 529 savings plan without tax and without penalty.

Computers & Internet

Computers and internet access are also considered qualified expenses as is “peripheral equipment.” This includes mouses, speakers, and software required for college courses. They must be used by the beneficiary primarily during their enrollment years. Software for entertainment or amusement is not covered – same for other electronics and smart phones. If your student purchases such items using 529 funds, they will not be considered qualified and will be fully taxed.

K-12 Tuition and Expenses

Families can use a 529 plan to pay for up to $20,000* in K-12 tuition and expenses per year. Qualified K-12 expenses include:

Tuition (public, private, religious, and homeschool)
Curriculum materials, books (including digital/online) and instructional materials
Tutoring and instructional classes**
Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination, or any examinations related to college or university admission
Dual enrollment program fees
Educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider, including occupational, behavioral, physical, and speech-language therapies

Not all states consider K-12 expenses a qualified expense. You should make sure you understand your state's definition of qualified expenses before deducting money from a 529 for K-12 tuition.

*Starting in tax year 2026. The annual limit is $10,000 in tax year 2025.

**Tuition for tutoring or educational classes outside of the home, including at a tutoring facility, but only if the tutor or instructor is not related to the student and—
‘‘(i) is licensed as a teacher in any State,
‘‘(ii) has taught at an eligible educational institution,
or
‘‘(iii) is a subject matter expert in the relevant subject.

Credentialing Expenses

Starting in July 2025, funds in a 529 plan can be used for postsecondary credentialing and certification programs. This includes tuition, fees, books, supplies, and equipment needed to enroll in or attend a recognized postsecondary credential program. It also includes fees for tests if they are required to obtain or maintain a postsecondary credential. Fees for continuing education courses that are needed to obtain or maintain a credential are also included.

Apprenticeship Expenses

The funds in a 529 plan can be used for a variety of educational needs, including apprenticeship-related costs. These costs include fees, supplies, necessary tools, etc. In order to qualify, the program must be registered with the Secretary of Labor’s National Apprenticeships Act. You can check the U.S. Labor Department’s website to confirm that a program is registered.

Student Loans

Families can use funds from a 529 plan to repay student loans. The SECURE Act expanded the definition of qualified expenses to allow 529 plans to be used to repay the principal and/or interest on qualified education loans of the beneficiary and the beneficiary’s siblings. You can use a 529 to repay up to $10,000 per borrower. This is a lifetime limit that applies to distributions from all 529 plans. In other words, you can’t take withdrawals from multiple 529 plans in order to bypass the limit.

Roth IRA Rollovers

Some families worry that they may not use all they have saved in a 529 account. Starting in 2024, families can rollover unused 529 funds in a Roth IRA account for the beneficiary. There are a few rules to keep in mind:

The 529 account must have been open for more than 15 years and the rollover amount must have been in the 529 account for at least 5 years.
There is a lifetime rollover limit of $35,000 for each 529 account beneficiary.
Rollovers can only be made to the Roth IRA account owned by the named 529 account beneficiary.

A 529 plan covers a wide variety of education-related expenses. In addition, this new Roth IRA rollover rule provides an option for unused funds in a 529 account.

Exceptions

Not everything related to college is a qualified expense, including:

Transportation and travel costs
Application and testing fees
Sports expenses & health club dues
Extracurricular activities
Health insurance (unless it is charged as part of the tuition fee)

Because they are not qualified, they will be treated like ordinary income: state and federal taxes will apply, with a 10% federal penalty for withdrawals from your 529 plan used to pay for them.

Peace of Mind

So, now you know: qualified education expenses include much more than tuition. Withdrawals from your 529 savings plan can be used tax-free for books, computers, room and board, study abroad, and much more. Clearly, there are many ways to spend your 529 funds; and, in order to achieve the best outcomes for your student and your family, you get to decide how and when to use them.

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