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Understanding the Rules of Using My529 for Qualified Education Expenses





Unlocking the Value of Your My529: A Guide to Qualified Education Expenses

The My529 plan (Utah Educational Savings Plan) is a powerful tool for funding education, offering tax-advantaged growth on your savings. But as your student gets closer to college—or even elementary or secondary school—it’s vital to understand exactly what counts as a "Qualified Education Expense" (QEE) to ensure your withdrawals remain federal-tax-free.

Using your funds for non-qualified expenses can subject the earnings portion of your withdrawal to both income tax and a 10% federal penalty, so let's break down the rules for utilizing your My529 savings.

🎓 Higher Education Expenses (College, University, Trade School)

The most common use for your My529 savings is for post-secondary education. Here's what qualifies at an eligible educational institution—which generally means any school (including colleges, universities, and vocational schools) eligible to participate in a U.S. Department of Education student aid program. This includes many foreign institutions as well.

CategoryQualified ExpensesImportant Limitations/Notes
Tuition & FeesTuition and required fees for enrollment.Covers the full amount.
Room and BoardHousing, utilities, and food costs.Student must be enrolled at least half-time. Cannot exceed the greater of: 1) the room and board allowance included in the school's Cost of Attendance (COA) for federal financial aid, OR 2) the actual amount charged for students living in housing owned or operated by the eligible institution.
Books & SuppliesRequired books, supplies, and equipment.Must be mandatory for enrollment or courses.
TechnologyComputers, peripheral equipment, educational software, and internet access.Must be used primarily by the beneficiary during their enrollment years. Entertainment software is excluded.
Special NeedsNecessary special needs services and equipment.Must be required for enrollment or attendance.

🍎 K-12 Education Expenses

Thanks to recent federal legislation, My529 funds can also be used for elementary and secondary (K-12) education expenses at public, private, or religious schools, though specific rules and limits apply:

CategoryQualified ExpensesImportant Limitations/Notes
K-12 Tuition & ExpensesTuition, curriculum materials, books, online educational materials, and instructional materials.Limited to a combined total of $10,000 per beneficiary per calendar year from all 529 accounts.
K-12 TutoringTuition for tutoring or educational classes outside the home.The tutor cannot be related to the student and must be a licensed teacher, a current/former teacher at an eligible institution, or a subject matter expert.
Standardized TestsFees for nationally standardized achievement tests, Advanced Placement exams, or college admissions/entrance exams (e.g., SAT, ACT).
Educational TherapiesOccupational, behavioral, physical, and speech-language therapies for students with disabilities, provided by a licensed practitioner.

🛠️ Other Qualified Uses

The scope of 529 plans has expanded to cover several other essential educational costs:

  • Apprenticeships: Fees, books, supplies, and equipment required for participation in a program registered under the National Apprenticeship Act.

  • Student Loan Repayment: Up to a lifetime limit of $10,000 (principal and interest) per beneficiary (or their sibling) across all 529 accounts.

  • Credentialing: Qualified postsecondary credentialing expenses, including tuition, fees, books, supplies, equipment, and testing/continuing education fees required to obtain or maintain the credential.

  • Rollover to a Roth IRA: A tax and penalty-free rollover of up to a lifetime limit of $35,000 to a Roth IRA owned by the beneficiary, subject to rules like annual Roth contribution limits and the 529 account being open for 15+ years.

🛑 Expenses That DO NOT Qualify

To avoid taxes and penalties, be mindful of costs that are generally NOT considered qualified education expenses:

  • Transportation or travel expenses (including to and from school).

  • Health insurance premiums or fees.

  • Student activity fees (e.g., club dues, gym memberships).

  • Furniture or dorm room decorations.

  • The cost of a student's mobile phone.

🔑 Key Takeaways for Tax-Free Withdrawals

  1. Keep Records: Save all receipts, invoices, and bills related to your QEEs. The IRS can audit your withdrawals for up to three years.

  2. Match Timing: Withdrawals should generally be made in the same tax year as the expenses are paid to avoid reporting mismatches.

  3. Coordinate with Financial Aid: When calculating the amount to withdraw, subtract any tax-free educational assistance (like scholarships, Pell Grants, or employer assistance) your student has received. Using 529 funds for costs already covered by tax-free aid is considered a non-qualified expense.

  4. Know Your Limits: Be strictly aware of the $10,000 annual limit for K-12 expenses and the $10,000 lifetime limit for student loan repayment.

By following these guidelines and double-checking your expenses against the My529 program description, you can successfully harness the full tax benefits of your college savings plan!

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