SUMMARY: Looking to start a 529 College Savings Account but overwhelmed with questions? Keep reading for a cheat sheet to answer some of the most common questions regarding 529 savings accounts:
What Are Qualified Expenses?
- Books, supplies, and equipment are qualified; however, laptops and other tech devices are qualified expenses only if required for enrollment or attendance at a school.
- Airfare or driving expenses to and from college are not qualified expenses.
- Health insurance is not a qualified expense.
What Happens if Your Child Gets a Scholarship?
- Withdrawal of the scholarship amount from the 529 account is penalty-free but not tax-free.
- The 529 funds may pay for the student’s postgraduate education.
- The 529 funds may pay for qualified expenses of grandchildren, other children, or other family members. The beneficiaries of a 529 account may change at any time. As long as the withdrawn funds pay for qualified expenses, they remain tax-free.
When Should Funds Be Withdrawn?