How can I use the money in my 529 plan account?
The money in an account can be used for any purpose. However, to qualify for federal tax-free withdrawals on earnings,1 the money must be used for qualified higher education expenses for the beneficiary at an eligible educational institution. These include tuition, mandatory fees, books, supplies, and equipment required for enrollment or attendance; certain room and board costs during any academic period the beneficiary is enrolled at least half-time; and certain expenses for a special-needs student.
How do I know which educational institutions are eligible?
If a school has been assigned a federal school code by the Department of Education, then it is an eligible institution under Section 529. To search for eligible schools, click here.
Is paying off a student loan a qualified higher education expense?
No. There are a number of expenses for which you can use the assets of a 529 plan, but repayment of student loans is not one of them. Qualified expenses include tuition, mandatory fees, books, supplies, and equipment required for enrollment or attendance; certain room and board costs during any academic period the beneficiary is enrolled at least halftime; and certain expenses for a special-needs student. For information on student loan options, click here.
How do I make withdrawals from a 529 plan?
You should check with your plan, but qualified withdrawals generally can be requested online, by phone, or by submitting a withdrawal request form. Proceeds from qualified withdrawals can be sent to the account owner, the beneficiary, or the higher education institution, depending on the plan.
1 Earnings on non-qualified withdrawals are subject to federal income tax and may be subject to a 10% federal tax penalty, as well as state and local income taxes. The availability of tax and other benefits may be contingent on meeting other requirements.