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  • Writer's pictureStephen Boatman

529 Expenses: Common, Uncommon and Un-used Strategies

In the world of 529 plans, most parents and grandparents want to know what expenses qualify as allowable. How far can they take these expenses, and what is off-limits? Below we will discuss the main points in order to leave you with a slightly better understanding than you had 5 minutes ago.

Common Allowable 529 Expenses

  1. Tuition

  2. Room and board: Amount limited to the cost of university housing but you can live off campus and use 529 money for room and board.

  3. Books and supplies: Only if required for enrollment or attendance

  4. Computers and related equipment: Software and hardware that are required for school is ok; gaming attachments/upgrades do not qualify.

  5. Kindergarten - 12th grade tuition: Up to $10,000 per year per beneficiary.

  6. Existing student loans: You can pay off existing student loans with 529 plans, however, only $10,000 is allowed per beneficiary for their lifetime.

My favorite 529 Expenses

  1. Studying abroad: Room & board and tuition costs are qualified, but plane tickets, museum tickets, and souvenirs are not included.

  2. Foreign schools: Foreign costs will qualify if the foreign school is a Title IV institution. See a list of qualifying schools HERE.

  3. Trade school and apprenticeship programs qualify

  4. Flight school for pilots

Un-Used 529 Dollar Options

This is for dollars that may be left over, within a 529 account, after college expenses are accounted for or a different route is taken.

  1. Transfer 529 to a different beneficiary: You can transfer the 529 account to a spouse, child, foster or stepchild, son or daughter-in-law, siblings, father/mother, aunt/uncle, niece/nephew, and even first cousin's.

  2. Dynasty 529 plan: Read more HERE

  3. Penalty-Free scholarship withdrawal: You can withdraw up to the award amount without penalty or tax on contributions. However, withdrawn earnings will face income taxes, but the 10% penalty on earnings will be avoided.

  4. Roth IRA rollover for unused funds: Up to $35k per bene per lifetime may be rolled over. However, only $7,000 is allowed per year if earned income is at least $7k. You can read more details about this option HERE

Ineligible Expenses

  1. Transportation

  2. School-sponsored health insurance

  3. College entrance and application fees

  4. Greek life fees

  5. Club fees

  6. Clothing: unless a uniform is required

Non-Qualified 529 Expense Penalty

If you withdraw funds from a 529 for non-qualified expenses, you will owe a 10% penalty on the portion of the withdrawal that is applied to the earnings within the account. There is no 10% penalty applied to contributions. You will also pay income taxes on the earnings withdrawn from the account, if for non-qualifying 529 expenses. Side note, you are not able to withdraw only contributions in order to avoid the penalty and tax on earnings, amounts are intermingled.


Although 529 accounts are an excellent tool for avoiding capital gains taxes while saving for college expenses, they aren't the only option. You can learn more about my top seven ways to save for college HERE. As always, please speak with a financial professional before utilizing any tax-advantaged accounts that come with more strings than you may be aware of.

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