You can use 529 money for tuition, room and board, books, and equipment at any school that accepts federal student aid

A 529 plan lets you withdraw money tax-free as long as you spend it on may have access to education expenses. The most common ones are tuition and fees at a college, university, or trade school. But the list is wider than that — it also covers room and board if the student lives on campus or off campus while enrolled at least half-time, required books and supplies, computers and internet access, and certain student loan repayments.

The school has to be accredited and accept federal student aid. That includes most public universities, private colleges, community colleges, and vocational schools. It does not include unaccredited online programs or schools that do not participate in federal aid programs.

You do not have to spend the money in the year you withdraw it. You can take it out and hold it in a separate account, then use it later in the same calendar year. But if you withdraw money and do not spend it on a may have access to expense within that calendar year, you will owe taxes on the earnings plus a 10 percent penalty on those earnings.

Key Takeaways

  • may have access to expenses include tuition, fees, room and board, books, computers, and certain loan repayments at schools that accept federal student aid.
  • You withdraw money directly from the 529 plan account, and the withdrawal is tax-free if spent on may have access to expenses in the same calendar year.
  • If you withdraw money and do not use it for may have access to expenses, you pay income tax on the earnings plus a 10 percent penalty on those earnings only.
  • Some states let you use 529 money for K-12 tuition and expenses, but the rules vary by state and plan.
  • If a beneficiary does not go to college or does not use all the money, you can transfer the remaining balance to a family member or roll it into a Roth IRA under certain conditions.

How to request a withdrawal from your 529 account

Contact the plan administrator — the financial institution that holds your account. This is usually Vanguard, Fidelity, New York's 529 Direct Plan, or your state's official 529 plan. You can find the contact information on your account statements or the plan's website.

Tell them you want to withdraw money for may have access to education expenses. Most plans let you request a withdrawal online, by phone, or by mail. You will need to provide the amount you want to withdraw and the school name and address. Some plans ask you to estimate your may have access to expenses for the year.

The money usually arrives in your bank account within three to five business days. Some plans let you have the check sent directly to the school instead. If you choose that route, the school will credit it to the student's account.

What counts as a may have access to education expense

Tuition and mandatory fees are the clearest may have access to expenses. These are charges the school requires you to pay to enroll. They include lab fees, technology fees, and student activity fees that are mandatory, but not parking permits or housing deposits.

Room and board counts if the student is enrolled at least half-time. If the student lives on campus, you can use 529 money for the actual housing and meal plan charges. If the student lives off campus, the amount is capped at what the school's cost of attendance estimate says room and board should be — you cannot use 529 money to pay for luxury housing or a private apartment that costs more than the school's estimate.

Books, supplies, and equipment required for the course of study are covered. This includes textbooks, lab notebooks, art supplies, and musical instruments. A computer and internet access also count if they are used for school, though some plans cap the amount you can spend on technology each year.

Student loan repayment is a newer may have access to expense. You can withdraw up to $35,000 total over the beneficiary's lifetime to pay down federal or private student loans taken out by the beneficiary. This is a one-time election per beneficiary, so plan carefully.

What does not count as a may have access to expense

Transportation and travel to school are not covered, even if the student has to fly home for breaks. Health insurance premiums are not covered. Room and board for students enrolled less than half-time does not count. Parking fees, student activity fees that are optional, and housing deposits are not may have access to expenses.

If you withdraw money for something that is not on the may have access to list, you will owe income tax on the earnings portion of that withdrawal, plus a 10 percent penalty on the earnings. The principal (the money you originally put in) comes out tax-free, but the growth does not.

Using 529 money for K-12 tuition and expenses

Some states let you use 529 money for private K-12 school tuition. The rules vary by state and by plan. A few states cover tuition only; others also cover books, supplies, and uniforms. Some states do not allow K-12 withdrawals at all.

Check your specific plan's rules or your state's 529 program website to see whether K-12 expenses are covered. If your plan does not allow it, you may be able to roll the money into a different state's plan that does, though this process takes time and has specific rules.

K-12 withdrawals are still tax-free as long as the school is accredited and you spend the money in the same calendar year. The same 10 percent penalty applies if you withdraw money and do not use it for may have access to K-12 expenses.

What happens if money is left over

If the beneficiary does not use all the 529 money, you have several options. You can transfer the remaining balance to a family member — a sibling, cousin, grandchild, or even the original account owner's spouse. The transfer is tax-free if done correctly, and the new beneficiary can use the money for their own education expenses.

You can also roll the money into a Roth IRA for the beneficiary, up to certain limits. This is a newer option that lets unused 529 money grow for retirement instead of sitting idle. The rollover is tax-free, but there are rules about how long the money has to have been in the 529 plan and how much can be rolled over each year.

If you do neither of these, you can withdraw the leftover money as a non-may have access to withdrawal. You will owe income tax on the earnings and a 10 percent penalty on the earnings, but the principal comes out tax-free. This is the least tax-efficient option.

Keeping records of your withdrawals

Save all receipts and invoices from the school showing tuition, fees, room and board, books, and supplies. Keep records of your 529 withdrawals and the dates you made them. If the IRS ever questions whether your withdrawal was for a may have access to expense, you will need to show proof.

Many schools provide a 1098-T form at the end of the year showing tuition and fees paid. This is useful for tax purposes if you are also claiming an education tax credit, though 529 withdrawals and education credits have specific rules about how they interact. You may not be able to claim both for the same expense.

Frequently Asked Questions

Can I use 529 money for room and board if my student lives off campus?

Yes, but only up to the amount the school says room and board should cost. If your school's cost of attendance estimate says room and board is $15,000 per year and your student's actual apartment costs $18,000, you can only withdraw $15,000 from the 529 plan for that expense. The student or their family has to cover the extra $3,000 from other sources.

What if I withdraw money from the 529 but the student does not enroll in school that year?

If you withdraw the money and do not spend it on may have access to expenses in the same calendar year, you owe income tax on the earnings portion plus a 10 percent penalty on those earnings. The principal comes out tax-free. This is why it is important to time your withdrawals carefully if enrollment dates are uncertain.

Can I use 529 money to pay for a student's first apartment?

Only if it counts as room and board under the school's cost of attendance estimate. If the student is enrolled at least half-time and the apartment is their primary residence while in school, and the cost is within the school's estimate, then yes. If the student is not enrolled or the apartment is not their primary residence, it does not count.

Do I have to use the 529 money before the student graduates?

No. You can withdraw money and hold it in a separate account, then use it for may have access to expenses after graduation if the student is still enrolled in a degree program or is paying back student loans. The key is that the expense itself has to be may have access to — the timing of when you withdraw does not matter as much as what you spend it on.

What if the school refunds tuition because of a course cancellation?

If you withdraw 529 money for tuition and the school refunds part of it, you should deposit the refund back into the 529 plan if possible. If you keep the refund, you may owe taxes and penalties on the earnings portion of that refund. Check with your plan administrator about the best way to handle refunds.