Options for using 529 plans to pay for distance learning and online learning are limited, especially for K-12 and homeschooled students. Some members of Congress are calling for expanding coverage due to the coronavirus pandemic’s zoomification of elementary, secondary and postsecondary education. This would help families or children who are now learning from home.
Currently, qualified education expenses for a 529 plan include college tuition and fees and up to $10,000 per year in K-12 tuition. The tuition and fees can include accredited online education programs, but not homeschooling expenses.
Qualified expenses include books, supplies and equipment, computers and internet access, and special needs expenses, but for college expenses only.
The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) originally included a proposal to allow 529 plans to be used for homeschooling expenses, such as textbooks, online education materials, tutoring services, and dual enrollment programs.
The SECURE Act also included a proposal to allow 529 plans to be used for the same qualified elementary and secondary school expenses as Coverdell education savings accounts, such as tutoring, special needs services, books, supplies and equipment, not just $10,000 in tuition.
Both proposals were dropped from the final version of the legislation that passed the House, in part because of opposition from teacher unions.
Passage of the legislation was delayed in the U.S. Senate when Senator Ted Cruz (R-Texas) blocked the use of unanimous consent, hoping to restore these proposals. Senator Cruz is a strong supporter of homeschooling. He introduced legislation in 2018 and 2019 to expand qualified education expenses for 529 plans to cover more K-12 education expenses for all students, including homeschool students.
Representative Bryan Steil (R-Wisconsin) has lead an effort in the U.S. House of Representatives to attach similar legislation to the next coronavirus relief measure.
“With schools closed, students and families are adjusting to online and distance learning. To ease the financial burden on many families, funds in 529 plans should be expanded to help students obtain the needed curriculum material or online educational material.” said Rep. Steil.