Qualified Education Expenses

The money in a Section 529 Plan should be dedicated to paying “qualified education expenses.” These expenses include tuition, fees, books, course supplies, room and board, and required course equipment. All of these expenses must be charged by an institution the U.S. Department of Education considers to be eligible for participation. The student must also be enrolled at least half-time at this accredited institution.

No one savings plan is 100-percent perfect for everyone. Before you decide to enroll in any plan, be sure to investigate and weigh all the benefits and risks very carefully. Some of the factors that need to be considered are your level of income, the age of the child, the plan's mandatory fees, and what investment options are available with the plan.

Qualified educational expenses are reduced by any tax-free financial aid the student receives, such as tax-free scholarships, veterans’ benefits, Pell grants, employer-provided educational assistance, and other nontaxable forms of educational assistance. The taxable part is based on the difference between the total of the distributions and the adjusted qualified educational expenses. See IRS Publication 970 (available on the Web at www.irs.gov) for an explanation of how to determine the amount of qualified educational expenses you have.

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