Are College Application Fees Covered by 529 Plans? What You Need to Know Before You Withdraw

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Mark Kantrowitz

By Mark Kantrowitz

December 13, 2024

Selective colleges charge admission application fees of $50 to $100 each. Add in admissions testing fees; the total can be as high as $107 per college. If the student applies to many colleges, the fees can quickly add up to thousands of dollars.

So, it is unsurprising that parents might want to use tax-free withdrawals from 529 plan funds to pay for college application and admissions testing fees.

Unfortunately, college application fees and admissions testing fees are not qualified expenses for 529 college savings plans. If you use 529 plan funds to pay for these fees, the IRS will consider this a non-qualified withdrawal, subject to ordinary income taxes and a 10% tax penalty on the earnings portion of the distribution.

The statutory language at 26 USC 529(e)(3) states:

“The term ‘qualified higher education expenses’ means tuition, fees, books, supplies and equipment required for the enrollment or attendance of a designated beneficiary at an eligible educational institution.”

You must pay college application fees and admissions testing fees before a student accepts admission at an eligible educational institution.

While these fees may be necessary for admission, they don’t meet the specific legal requirement of being “required for enrollment or attendance.” This distinction is why they cannot be considered qualified expenses under 529 plans.

While one might argue that application fees are necessary for admission, they don’t guarantee enrollment or attendance. Since students apply to multiple colleges but only attend one, these fees don’t meet the legal requirements to be considered qualified college expenses.

Moreover, students usually apply to multiple colleges but attend only one. College application fees you pay to other colleges could not have been required for the beneficiary to enroll or attend the college chosen by the beneficiary.

Thus, college application fees and admissions testing fees do not satisfy the requirements for being considered a qualified higher education expense. Using a 529 plan to pay for these would be a non-qualified withdrawal.

College application fees and admissions testing fees also do not satisfy the requirements to be considered an eligible K-12 expense since the Tax Cuts and Jobs Act of 2017 limited qualified K-12 school expenses to “tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.”

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