28 Feb Can 529 plan pay for college prep?

Q. Can I use my 529 plan to pay for stuff to get my kid ready for college, like SAT classes, college tours, etc.?
—Mom

A. There are lots of costs you can use a 529 plan for, but the college prep stuff, in most cases, won’t qualify.

Qualified higher education expenses for a 529 plan include tuition, room and board, fees required by the university, books and expenses of special-needs beneficiary necessary for enrollment at an eligible institution.

Paying for the “getting ready” stuff is not included in the list of qualified expenses, other than things such as the purchase of computer or peripheral equipment, computer software, or internet access and related services if it is to be used primarily by the beneficiary of the 529 during any of the years the beneficiary is enrolled in college.

You can’t use the money for college visits, either.

“In order to use your 529 plan, it is imperative that the expenses are for eligible college institutions,” said Steven Sirot, co-founder of College Benefits Research Group (CBRG) in Roseland. “You should review the detailed description of both the eligible college institutions and expenses, which are listed in the IRS tax publication 970.”

Sirot said expenses such as room and board can get tricky because if your child will be living off campus, the expenses cannot be claimed if the cost is in excess of the school’s estimated cost for room and board.

Also be sure not to use any 529 plan funds for entertainment or any non-education expense, said David Slater, co-founder of CBRG.

“Even if there is money left over in the 529 plan account, let it sit there in case your child plans to pursue any post-graduate studies,” Slater said. “It is always best to have an ongoing dialogue with your financial advisor and the financial aid office at your child’s school to ensure what expenses your 529 plan covers.”

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This post was first published in February 2017.