With the reconfiguration of the college experience during COVID, higher education institutions are maintaining in-person classes, going online-only, or a creating a hybrid schedule of both options.
A question that Ohio’s 529 Plan, CollegeAdvantage, has been hearing is if families can still use their college savings plans to cover these online tuition costs.
The good news is that your tax-free 529 withdrawal will cover those tuition costs, whether your student is heading to a classroom or sitting in front of their laptop for online learning. 529 college savings plans are made to cover those qualified expenses necessary to attend a higher education institution. And tuition — whether for in-person or online classes— is a necessary cost for attendance.
What are other 529- qualified higher education expenses for a traditional four-year college or university, a two-year community college, a trade or vocational school, certificate program, and qualified apprenticeship programs. They include:
529 plan qualified higher education expenses
- Tuition (whether in a classroom or online);
- Room and board during any academic period in which the 529 beneficiary is enrolled for at least half of the full-time academic workload according to the eligible education institution;
- Mandatory fees;
- Computer equipment and related technology as well as internet services;
- Books, supplies and equipment related to enrollment and class schedule; and
- Certain expenses for a special-needs student.
- Qualified costs for apprenticeships such as fees, textbooks, supplies, and equipment like required trade tools.
- Student loan repayment. Any student loan that qualifies for the federal student loan income tax deduction can now be paid with a 529 distribution. There is a $10,000 lifetime limit per 529 beneficiary. However, an additional $10,000 can be used to repay qualified student loans for each of the beneficiary’s siblings.
Room and board costs can also include rent for off-campus residency and groceries (non-taxable items), provided these costs are equal or less than the same room and board allowances from the accredited education institution.
What expenses aren’t considered qualified higher education expenses? Here are a few:
Non-qualified higher education expenses
- Transportation costs to and from the school;
- Insurance;
- Fees and equipment which are not required for enrollment,;
- Parking tickets;
- Restaurants and taxable food items; and
- Library fines.
To pay for these 529-qualified costs, there are different manners to make a withdrawal from a college savings plan. The quickest and easiest will be online withdrawal request from a 529 plan to a bank account to pay to the higher learning institution with an electronic transfer from the bank account. Or the account owner can pay with a paper check once the 529 withdrawal has been deposited in their bank account. Additionally, the account owner can have the 529 plan provider issue a paper check directly to the post-secondary education institution. Ohio’s 529 Saving Program offers tips on how to be reimbursed from a 529 account for other qualified higher education expenses.
As a general rule, account owners should take the 529 withdrawal within the same calendar year that the 529-qualified higher education expense will occur. For instance, if you would like to pay for the new semester’s tuition for 2024, you should make the withdrawal in 2024. For tax purposes, the burden of proof for qualified expenses and withdrawals to pay them is on the account owner. Please retain all documentation of the qualified higher education expenses and the subsequent reimbursement or payment from a 529 plan.
Visit Ohio’s 529 Plan online to start saving today for your child’s future education. An investment in a 529 plan is an investment in your child where every dollar saved today is a dollar that doesn’t have to be borrowed later. A 529 account can be used for whatever comes after high school. If you’d like to do more research, explore Ohio’s 529 Plan —The Plan That Can.
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