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One of the main advantages of a 529 plan is the ability to grow your education savings tax-free. Those tax benefits also apply once you begin withdrawing from the account as long as the funds are used toward eligible expenses.

Since earnings on non-qualified tax withdrawals are taxed as ordinary income and may also be subject to a 10% federal income tax penalty, the following list of qualified expenses can help you avoid paying unnecessary taxes and ensure you’re using your hard-earned savings as efficiently as possible.

One

Postsecondary education tuition – Regardless of the school your child chooses to attend, your 529 savings plan funds can be used toward tuition as long as the school is eligible for federal student aid (see Qualified Tuition Expenses below). The same is also true for graduate school and even some schools abroad.

Two

Living on or off campus – As long as your child is enrolled in a degree or certificate-seeking program at least half time, room and board on campus is considered a qualified expense. For those living off campus, the cost of rent and utilities up to the school’s allotment is considered qualified, but any amount above the allowance could be subject to taxes.

Three Groceries – If your child is living off campus, food expenses up to the cost of an on-campus dining plan can be covered by 529 funds, but the tax advantage only applies to necessities—not dining out or entertainment costs. It’s best to confirm an exact figure with your child’s school each year.
Four

Academic fees – Additional fees such as technology or lab fees are qualified expenses. Activity fees for sports or organizations, however, aren’t eligible.

Five

Books and supplies – In addition to textbooks and class-specific materials, school and office supplies, such as notebooks, pens, pencils, etc., are also covered expenses.

Six

Computers – If the school doesn’t supply your student with a laptop or desktop computer, purchasing one on your own is considered a qualified expense. This benefit also extends to peripherals such as printers.

Seven

Specialized software – Educational or professional software required to complete coursework also qualifies. For example, design software would be eligible for a student completing a graphic-design degree.

Eight

Internet access – Internet access is a covered expense for students who live off campus. However, beware of bundling: cable and phone costs may not be covered.

Nine

K–12 schooling – You can use up to $10,000 of funds per student each year toward private or religious K–12 tuition in most states1 (be sure to check if your state complies with this qualified expense).

Ten

Student-loan repayment and apprenticeships – In recent years, use of 529 funds has been expanded to include qualified student-loan repayments2 (with a maximum lifetime limit of up to $10,000), as well as qualified apprenticeships and associated fees.3

 

Qualified Tuition Expenses:

  • Colleges and universities
  • Trade and vocational schools
  • Apprenticeship programs
  • K-12 tuition

Qualified Education Expenses:

  • Tuition and fees
  • Room and board
  • Books, supplies, equipment
  • Expenses for special needs
  • Computers, software, and Internet
  • Student Loans

Talk to your financial professional to make the most of a 529 plan.

 

1 If using a 529 plan for K–12, it can only be used for tuition up to $10,000 per year.

2 Can be used for student loan repayment for a maximum lifetime limit of up to $10,000

3 529 plans can be used for apprenticeship programs registered and certified with the Secretary of Labor under the National Apprenticeship Act.

Sources: Hartford Funds, IRS.gov, and savingforcollege.com, 10/22

This material is provided for educational purposes only. The preceding is not tax or legal advice. Please consult with a tax professional for more information.

Before investing, an investor should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s 529 plan.

For more information about any 529 college savings plan, contact the plan provider to obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. Hartford Funds Distributors, LLC serves as distributor and underwriter for some 529 plans.

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The material on this site is for informational and educational purposes only. The material should not be considered tax or legal advice and is not to be relied on as a forecast. The material is also not a recommendation or advice regarding any particular security, strategy or product. Hartford Funds does not represent that any products or strategies discussed are appropriate for any particular investor so investors should seek their own professional advice before investing. Hartford Funds does not serve as a fiduciary. Content is current as of the publication date or date indicated, and may be superseded by subsequent market and economic conditions.

Investing involves risk, including the possible loss of principal. Investors should carefully consider a fund's investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund, or ETF summary prospectus and/or prospectus, which can be obtained from a financial professional and should be read carefully before investing.

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