Non-Qualified Expenses: What You Can’t Pay for With a 529 Plan

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Kathryn Flynn

By Kathryn Flynn

December 21, 2023

529 plans are tax-advantaged accounts designed to save for college, but the tax benefits are only available when you use the funds to pay for qualified expenses. Distributions used to pay for some college expenses are considered non-qualified and may be subject to income tax and a 10 percent tax penalty on the earnings portion of the withdrawal. Non-qualified 529 distributions may also be subject to recapture if you claim a state tax deduction. 

Qualified 529 plan expenses include costs required for enrollment or attendance at an eligible college or university. This includes college tuition, fees, books, supplies, equipment, and, in some cases, room and board. (Up to $10,000 per year can also be withdrawn tax-free to pay for K-12 tuition.) You can also make student loan payments with money from a 529 plan. 

However, some eligible expenses a college student or prospective student may incur are not considered qualified. These additional costs can be significant, so families may consider opening an additional savings account to complement their 529 plan. 

Here are some common expenses that are not considered qualified for 529 plan purposes:

College Application and Testing Fees

Qualified expenses include those required for the 529 plan designated beneficiary’s enrollment or attendance at an eligible educational institution. This does not include application and testing fees, which could cost thousands of dollars depending on how many colleges the student applies to.

  • College-Level Examination Program (CLEP) exams: $93 per exam, plus test center or remote proctoring administration fees
  • College test prep: Varies, but popular programs range from $599 – $699
  • ACT/ SAT: $55 – $85 per registration, additional costs for international students and late registration
  • College application fees: $30 – $90 per admission application, with an average of $45


Transportation costs are not a qualified 529 plan expense. According to the College Board’s Trends in College Pricing 2023 report, financial aid offices budgeted the following amounts for transportation costs for the 2023-24 school year cost of attendance:

  • Public 4-year college (in-state, living on campus): $1,290
  • Public 4-year college (out-of-state, living on campus): $1,290
  • Private 4-year college (living on campus): $1,100

These costs include average transportation expenses a student may incur while living on campus, including gas, maintenance, bus fare, and traveling home for vacations and holidays.

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Health insurance

If your family health insurance policy does not cover your child, you may be required to purchase health insurance through the college. The type of coverage available and the price of the policy will vary depending on the college, but these plans can cost thousands of dollars. Medical bills are also considered a non-qualified expense. 

However, suppose the university charges health insurance or transportation costs as part of a comprehensive tuition fee, or the fee is identified as a fee “required for enrollment or attendance.” In that case, the expense may be considered a qualified 529 plan expense.

Extracurricular activities and other miscellaneous related expenses

Joining a sport, club, fraternity, or sorority also comes with additional costs not covered by your child’s 529 plan. Club sports programs like rowing and field hockey are usually the most expensive, with dues as high as $2,500 per year. You may be able to use your child’s 529 plan savings to pay for fraternity or sorority housing costs (up to the college’s room and board allowance amount). 

Still, semester dues (sometimes more than $1,000) are considered a non-qualified expense. Other non-qualified personal expenses include gym memberships, entertainment, dates, and childcare.

Some room and board costs

Students can use 529 plan funds to pay for room and board expenses, but only if they are enrolled in an eligible college on at least half-time basis. If the student lives in off-campus housing, qualified room and board costs are limited to what is included in the college’s cost of attendance (COA) allowance for room and board for the period. Generally, you can’t use 529 plan funds to buy a house or pay a mortgage for the student’s off-campus housing.

Qualified expenses must have been incurred during an academic period when the student was enrolled in or accepted for enrollment in a program leading to a recognized academic credential.

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