529 Qualified Expenses: What Can You Use 529 Money for?

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Martha Kortiak Mert

By Martha Kortiak Mert

July 27, 2023

A 529 plan is a powerful tool that parents and family members can use to save for a child’s education. Contributing to a 529 plan offers tax advantages when the money in the account is used for qualified education expenses. However, there are many 529 plan rules, specifically for 529 qualified expenses. 

What are 529 eligible expenses, and how do you ensure you abide by 529 account rules? Today, we’ll cover an updated list of qualified education expenses, examples of non-qualified expenses, and what to do if you spend funds on a non-qualified expense. 

Let’s get started!

What you can pay for with a 529 plan

First off, let’s dive into the qualified expenses of a 529 plan.

Money invested in a 529 college savings plan grows tax-deferred, and qualified distributions are tax-free. Families may also be eligible for a state income tax deduction or credit for 529 plan contributions, depending on where they live (more on that in a minute, though).

Qualified higher education expenses include costs required for the enrollment or attendance at a college, university or other eligible post-secondary educational institution. The definition of qualified higher education expenses (for 529 plan purposes) also includes up to $10,000 per year in tuition for K-12 schools and up to $10,000 in student loan repayments.

Here is a list of common educational expenses and their qualification status:

Type of expense

Is it a qualified education expense?

Tuition and fees

Yes, up to the full amount of college or vocational school tuition and required fees. Limited to $10,000 per year for K-12.

Books and supplies

For college expenses only

Computers, software and internet access

For college expenses only

For college expenses only, if the student is enrolled at least half-time

Special needs equipment

For college expenses only

No, costs associated with transportation to and from campus, such as airfare or gas, are not qualified education expenses

No, even health insurance policies offered by a school are not considered qualified expenses


Extracurricular activity fees


Yes, with a lifetime limit of $10,000

It’s worth noting the rules for some of these expenses are a bit more complicated than others. 

Let’s break down each expense.

529 Qualified Expenses

These expenses are usually considered qualified education expenses for 529 plan funds, with a few exceptions. 

Tuition and fees

The funds you accumulate in a 529 plan can be used to pay the full amount of your tuition and fees for:

  • College 
  • University
  • Vocational and trade school
  • Public, private, or parochial elementary and secondary school

Attendance does not necessarily need to be physical. You can also use a 529 plan to pay for online college courses. 

As long as the college you’re enrolling in is an eligible institution (which means that the institution is eligible for Title IV federal student aid), you can use a 529 plan to pay for online tuition and fees.

But a 529 plan isn’t limited to just college or trade school tuition fees. 

Thanks to the Tax Cuts and Jobs Act of 2017, families can also use a 529 plan to pay for up to $10,000 worth of tuition expenses per year at an elementary or secondary school. This includes public, private, and parochial schools.

Books and supplies

If books and supplies are required to participate in a class, the full cost of those books and supplies is considered a qualified expense. This may include course textbooks, lab materials, safety equipment, or anything else mandatory for your coursework.

By contrast, you can’t claim books and supplies that aren’t required. 

For example, let’s say you’re taking a marine biology class, and you decide you’d like to do some additional reading on whales. Unfortunately, if the extra books you’d like to buy aren’t on the class reading list, you won’t be able to use a 529 plan to pay for them.

Computers, software, and internet access

You can use your 529 plan to purchase a computer, “peripheral equipment” (like a mouse or speakers), computer software, or internet access. 

According to the Internal Revenue Service (IRS), computers and internet access count as a qualified education expense as long as the beneficiary primarily uses that hardware (or internet access) while enrolled in an eligible institution.

It’s important to note the IRS specifically states computer software that has nothing to do with your studies doesn’t count as a qualified expense. That means computer games, sports software, or any apps related to a hobby can’t be paid for using a 529 plan. 

Room and board

You can use a 529 plan to pay for qualified room and board expenses like rent, other housing costs, and meal plans. This applies to on-campus and off-campus room and board as long as you incurred the costs while the beneficiary was enrolled at school. 

That being said, there are a couple of extra rules you’ve got to remember.

First, you can use a 529 plan to pay for off-campus and non university-managed accommodation as long as the beneficiary is enrolled in an eligible college program on at least a half-time basis. That student must also be studying towards a degree, certificate, or another recognized credential.

Additionally, off-campus students are limited to the allowance reported by the college in its “cost of attendance” figures. Any amount above the allowance is considered a non-qualified 529 plan expense. 

Studying abroad? Room and board costs incurred for abroad programs count as long as it’s approved for credit by your home college or university. 

Rent incurred during the summer months is also considered qualified when the student is enrolled at least half-time.

Keep in mind that you can’t use prepaid tuition plans like the Private College 529 Plan to pay for room and board.

That means if your family is using a prepaid tuition plan, you might want to think about setting up a 529 college savings plan so that you can save for extra expenses like room and board.

Special needs equipment

Special needs equipment refers to services necessary for students with disabilities or other special needs to attend college or university. If you genuinely require special needs equipment to enroll and participate in a course at an eligible institution, you can meet these costs with your 529 plan.

Families with special needs may also consider using a 529 ABLE account to save for college and other education expenses.

Student loans 

529 plans don’t have any time limits. If you have leftover money in your 529 college savings plan after you graduate, you can use that money to pay off all or part of your student loan debt.

This change was introduced as part of the 2019 SECURE Act, which applies to all 529 plan distributions made after December 31, 2018.

But again, there’s a caveat: the law only allows you to pay off a lifetime limit of $10,000 in qualified student loan repayments using your 529 plan. If you owe more than $10,000 in student loans, you can only use your 529 plan to pay for that first $10,000.

529 non-qualified expenses

The next set of expenses are usually considered non-qualified, except under certain circumstances. 

Transportation and travel costs

Transportation and travel costs like gas and transit passes are generally not considered qualified 529 plan expenses.

You cannot use a 529 plan to buy or rent a car, maintain a vehicle, or pay for other travel costs. If you use a 529 distribution to pay for this type of expense, those distributions are considered non-qualified. 

An exception to this rule may be if your college charges a travel or transportation cost as part of a comprehensive tuition fee, or if that fee is identified as being required for enrollment or attendance.

Health insurance

Your college might require students to have health insurance, but you can’t use a 529 to pay for health insurance. If your college requires it, you’ll typically get a waiver on that requirement if you’re covered under your parent’s health insurance plan.

Again, there is an exception to this rule. If your institution charges health insurance as part of a comprehensive tuition fee (or the fee is required for enrollment or attendance), the cost of your health insurance may count as a qualified 529 plan expense.

College application and testing fees

Any costs incurred before a student’s admission to a college or university, such as college application and testing fees, are not considered qualified expenses. 

Although these costs are required for admission, they are not required for enrollment or attendance.

If 529 plan funds are used to pay for any pre-enrollment fees, it will be considered a non-qualified distribution.

How to calculate 529 plan qualified expenses

The maximum amount you can withdraw tax-free from a 529 plan is the total amount of higher education expenses paid during the year, minus any amount used to generate other federal tax benefits.

Parents who use 529 plans to pay for college may be eligible for additional tax savings with the American Opportunity Tax Credit (AOTC) or Lifetime Learning Tax Credit (LLTC). However, these federal education tax credits are only available for families who meet income requirements.

The AOTC offers a 100% credit for the first $2,000 used to pay for education expenses and 25% for the next $2,000 used, for a maximum credit of $2,500 if you spend $4,000 on qualified expenses.

Money in a 529 plan can only be withdrawn tax-free when used for qualified expenses not covered by payments that generated the AOTC. So, in this scenario, the taxpayer would subtract $4,000 from the qualified educational expenses they paid when determining how much they should withdraw from their 529 plan.

The credit does phase out at higher incomes, so some families may get a smaller credit or not be eligible at all. An accountant or tax advisor may be able to provide more guidance on your specific situation.

For an expense to be qualified, you must withdraw money from the 529 plan in the year you incurred the expense. You can’t incur an expense in one year and withdraw from the 529 plan in a different year.

What Happens if the Account Beneficiary Doesn’t Go to College?

If you open a 529 plan for someone who decides not to go to college, you have a few options.

One is to simply take the money out and use it for non-educational expenses. However, you’ll incur penalties (more on those later). 

Another option is to change the beneficiary of the account. For example, a parent with two children could change the account beneficiary to their other child and use the money for their benefit.

Changing the beneficiary won’t have any tax implications as long as the new beneficiary is a family member of the account owner, the owner themselves, or a grandchild. Most 529 plans allow beneficiary changes at any time by completing a form found on their website.

Passage of the SECURE 2.0 act in 2022 is creating a new option for 529 account holders. Starting in 2024, leftover funds in a 529 plan can be rolled over tax and penalty-free to a Roth IRA in the beneficiary’s name. There are several limitations to be aware of, including a cap on the total amount that can be rolled over and annual contribution limits.

Other options include paying off student loans or saving the money for graduate school down the line.

What Happens if You Use a 529 Plan for Non-Qualified Expenses?

You can withdraw funds from your 529 plan at any time, for any reason, but don’t forget: if you withdraw money for non-qualified expenses, you will incur income taxes on the earnings portion of the distribution. You also have to pay an additional 10% penalty on those earnings.

States can also impose additional penalties. 

For example, California adds a 2.5% tax penalty to the 10% federal tax penalty. States that offer state income tax deductions for 529 plan contributions may also make you pay the taxes you would have owed if you didn’t receive those deductions.

However, there are exceptions to the penalty rules. For example, you may be able to take money from the account for non-qualified expenses if you’re attending a military academy, earn a qualifying scholarship, or receive educational tax credits.

For more information on exceptions to the penalty rules, consult our guide.

How Long Can You Leave Money in a 529 Plan?

Some tax-advantaged accounts have rules about how long money can stay in the account. One of the best-known examples of this is the Required Minimum Distribution (RMD) rule for 401(k)s and IRAs. It’s natural to wonder if 529 plans have similar rules.

The good news for savers is that 529 plans don’t limit how long money can remain in the account. The only rule is that the account must have a living beneficiary. You can open a 529 plan for a child and keep money in the account until they’re 80 years old or older.


529 plans play an important role in your college savings plan, but you’ll make the most of them if you understand 529 qualified expenses and how to prove them.

A good place to start:

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