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The college savings account is a good way to offset college costs, but make sure it is used correctly.
School is back in session. Most college students are back on campus or just starting out their college years. There are new routines, social, and academic experiences to get used to. For students’ families, it is also a time of hope, excitement, and adjusting to their student no longer in the house. It is also a time of wading through all the tuition, fees, and new expenses associated with college.
A 529 plan is one way to help pay for a college degree. 529 plan assets can be used tax-free to pay for qualified expenses. Deposits can earn a tax benefit if it is a state sponsored plan.
For a full-time student living on campus, these expenses are pretty straightforward - tuition, fees, books & supplies and anything required as the cost of attendance generally fall into this category. When students move off campus, the same rules generally apply, but you need to make sure what qualifies and does not. Rent still is a qualified expense, as are utilities and groceries. Computers and software too, as long as it is used by the student and is required for their education (i.e.. non-essential software or apps do not qualify). Transportation expenses (cars, bicycles, parking, etc.) are not considered qualified, however, mandatory transit fees included as part of the cost of attendance would qualify.
Generally speaking, if something is a required expense from the school or it is material a teacher deems mandatory for class, then those are probably going to be allowable expenses.
Off-campus rent, groceries, and utilities can be paid with 529 funds without penalty. Internet service too as long it is used for educational purposes. An important aspect to be aware of with off-campus costs is that allowable expenses are limited up to the school's room & board costs. For example, if a school's room and board is $10,000 per semester, than that is the maximum amount of allowable expenses that can be used with 529 funds during that semester.
To be safe, keep track of spending and 529 disbursements. Also, consult with a tax and/or financial advisor.
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