What Can I Spend 529 Dollars on?
What can I spend 529 dollars on?
In order to avoid taxes or penalties on 529 dollars, remember to keep all of your records as you must report the expenses to the IRS. You want to add up tuition and fees, room and board, computers, equipment and books, then deduct any tax free education assistance like pell grants or scholarships. Your accountant will also need to help you take into account any tax credits like the American Opportunity Tax Credit or Lifetime Learning Credit.
You are now able to withdraw up to $10,000 (lifetime maximum) tax-free from your 529 account to pay down qualified education loans. One thing to note though is, any student loan interest paid for with tax-free 529 earnings can’t be applied toward student loan interest deductions.
You can also use your 529 dollars to pay for $10,000 in annual tuition expenses for Kindergarten through 12th grade education at private, public or religious schools. Only tuition costs are included in the tax-free distributions. Any other expenses do not qualify.
