529 accounts pay for tuition, room and board, books, and equipment at any school that accepts federal student aid
A 529 account can pay for may have access to education expenses at any college, university, trade school, or graduate program that participates in the federal student aid system. The IRS defines may have access to expenses as tuition, fees, room and board (if you're at least a half-time student), books, supplies, and equipment required for enrollment. You can also use 529 money to pay for a computer or internet access if the school requires it for coursework.
The school doesn't have to be in your state, and it doesn't have to be a four-year university. Community colleges, vocational schools, and graduate programs all count. The account owner or beneficiary can withdraw money to cover these costs at any point during enrollment, and the money goes directly to the beneficiary or the school.
Starting in 2024, you can also roll up to $35,000 from a 529 account into a Roth IRA in the beneficiary's name, as long as the 529 account has been open for at least 15 years. This is a one-time move and follows specific IRS rules, but it gives you a safety valve if the money isn't used for education.
Key Takeaways
- 529 money covers tuition, fees, room and board, books, supplies, and required equipment at any accredited school that accepts federal student aid.
- Withdrawals for non-may have access to expenses trigger income tax on the earnings plus a 10 percent penalty, though the contribution itself is never taxed.
- You can use 529 money for K-12 tuition at private schools (up to $235 per year per beneficiary as of 2024) and for up to $35,000 in student loan repayment.
- If the beneficiary doesn't use all the money, you can change the beneficiary to another family member or roll funds into a Roth IRA under specific conditions.
- The account owner keeps control of the money—the beneficiary cannot withdraw it without permission, even after turning 18.
Room and board, computers, and required supplies
Room and board is one of the largest may have access to expenses. If your beneficiary lives on campus, 529 money covers the housing and meal plan. If they live off-campus, the IRS allows a standard amount based on the school's cost of living estimate—you don't have to prove actual rent and food costs. The school publishes this figure as part of its cost of attendance, and 529 withdrawals can cover up to that amount.
Books, supplies, and equipment required for the course of study all count. This includes textbooks, lab materials, art supplies for a design program, or a stethoscope for nursing school. A computer or internet service counts if the school requires it for coursework—not just if it's convenient to have one.
Fees beyond tuition also may have access to: student activity fees, technology fees, parking permits on campus, and health insurance required by the school. The key test is whether the expense is required for enrollment or attendance.
K-12 private school tuition and student loan repayment
You can withdraw up to $235 per year per beneficiary (as of 2024) from a 529 account to pay for tuition at a private K-12 school. This amount is adjusted annually for inflation. The school must be accredited and located in the United States. Public school tuition is not covered because public schools do not charge tuition.
You can also use 529 money to pay down student loans—either the beneficiary's own loans or loans taken out by a parent on behalf of the beneficiary. The lifetime limit is $35,000 per beneficiary, and you can withdraw this amount in a single lump sum or over time. The loans must be federal or private student loans; other types of debt do not may have access to.
These two uses (K-12 tuition and student loan repayment) are separate from the main education expenses. You can use $235 per year for private school tuition and still have the full amount available for college expenses later.
What happens if you withdraw money for non-may have access to expenses
If you take money out of a 529 account for something that doesn't may have access to—a car, a laptop the school doesn't require, living expenses for an off-campus apartment not approved by the school—you pay income tax on the earnings portion of the withdrawal, plus a 10 percent penalty on those earnings. The contribution itself (the money you originally deposited) is never taxed or penalized, no matter how you spend it.
The penalty applies only to the earnings, not the full withdrawal. If you contributed $10,000 and the account grew to $12,000, and you withdraw $12,000 for a non-may have access to expense, you owe income tax and the 10 percent penalty only on the $2,000 in earnings. The $10,000 contribution comes out tax-free.
There is one exception: if the beneficiary receives a scholarship, you can withdraw an amount equal to the scholarship without penalty (though you still owe income tax on the earnings portion of that withdrawal). This prevents you from being penalized for having both a scholarship and a 529 account.
Changing the beneficiary or moving money if it's not used
If your beneficiary doesn't use all the 529 money for education, you have options. You can change the beneficiary to another family member—a sibling, cousin, niece, nephew, or even a parent or grandparent. The new beneficiary must be a family member as defined by the IRS, and the money can be used for their education expenses without any tax or penalty.
Starting in 2024, you can also roll unused 529 money into a Roth IRA in the beneficiary's name. The account must have been open for at least 15 years, and you can roll up to $35,000 over the beneficiary's lifetime. The contribution limits and income limits for Roth IRAs still apply, so this works best if the beneficiary has earned income and room in their annual Roth contribution limit.
If you don't change the beneficiary or roll the money to a Roth, you can leave the money in the account indefinitely. Some states allow accounts to stay open for decades. You only face the tax and penalty if you actually withdraw the money for a non-may have access to expense.
Graduate school and professional programs
529 money works the same way for graduate school as it does for undergraduate education. Tuition, fees, room and board, books, and required equipment all may have access to. This includes law school, medical school, MBA programs, master's degrees, and doctoral programs at any accredited institution that accepts federal student aid.
If your beneficiary is a graduate student, they may live off-campus, and the school's cost of attendance estimate will reflect that. The 529 can cover up to that amount for room and board, even if the actual rent is higher or lower.
Frequently Asked Questions
Can I use 529 money for room and board if my child lives at home?
No. If your beneficiary lives with you and attends school nearby, room and board expenses don't may have access to because they're not required for enrollment. Only students who are at least half-time and live away from home (on-campus or in approved off-campus housing) can use 529 money for room and board.
Does a 529 cover study abroad programs?
Yes, if the program is part of your beneficiary's degree at an accredited U.S. school. The tuition and fees paid to the U.S. school for the study abroad semester count as may have access to expenses. Costs paid directly to a foreign school or program may not may have access to—check with the school's financial aid office first.
Can I use 529 money to pay for my child's wedding or first apartment?
No. These are not education expenses. Withdrawing 529 money for these purposes triggers income tax and a 10 percent penalty on the earnings. The contribution itself comes out tax-free, but the growth is taxed and penalized.
What if my child gets a full scholarship?
You can withdraw an amount equal to the scholarship from the 529 without the 10 percent penalty. You still owe income tax on the earnings portion of that withdrawal, but the penalty is waived. This prevents the scholarship from making your 529 savings a problem.
Can I use 529 money for test prep courses like SAT or ACT prep?
No. Test preparation courses are not may have access to education expenses. The 529 covers tuition and fees at the school itself, not preparation for admission. Withdrawing for test prep triggers the income tax and 10 percent penalty on earnings.