Key takeaways

• 529 withdrawals are tax-free when used for qualified education expenses, including tuition, books, computers, and some housing costs.
• K-12 tuition, apprenticeships, and student loan payments also qualify due to recent law changes.
• Transportation, health insurance, and extracurricular fees usually do not count as qualified expenses.

A 529 plan can be one of the most tax-advantaged ways to save for education, but the benefits depend on how the money is used.

Withdrawals from a 529 account are tax-free only when they are used for qualified education expenses. If funds are spent on nonqualified costs, the earnings portion of the withdrawal could be subject to income taxes and penalties.¹

Understanding which education expenses qualify — and which do not — can help families avoid unexpected tax consequences and make informed decisions about how to use their 529 plan savings.

Read more: What is a 529 plan? How it works, potential benefits, & key rules

What are 529 plan qualified expenses?

Qualified expenses are education-related costs that the IRS allows you to pay with 529 plan funds without triggering federal income taxes or penalties on earnings.

These expenses generally include college tuition, books, supplies, computers, and certain room-and-board costs for eligible students attending qualified schools. Congress expanded the list last year to include K-12 expenses, job training and apprenticeship costs, and limited student loan repayments.

The key requirement is that the expense must meet IRS rules and be incurred during the same tax year as the 529 withdrawal.²

529 qualified expenses for college and postsecondary school

For higher education, qualified 529 expenses usually include:

• Tuition, including mandatory enrollment and course fees
• Textbooks, supplies, any course-required equipment
• Computers, laptops, internet access, and related software used primarily by the student
• Special needs services required for school enrollment or attendance

Eligible schools for qualified 529 expenses generally include colleges, universities, vocational schools, and other postsecondary institutions that participate in federal student aid programs.³

Qualified expenses can apply to:⁴

• Undergraduate programs
• Graduate and professional schools
• Trade, technical, and vocational schools
• Certificate programs and apprenticeships

The expense does not necessarily need to be billed directly by the school to qualify. For example, required textbooks purchased from an outside retailer may still count if they are needed for coursework.⁵

Room and board, rent, and food: What qualifies?

Room and board can qualify for tax-free 529 withdrawals, but generally only during the academic period and other specific conditions, such as the student being enrolled at least half-time at the eligible school.

If requirements are met, qualified room-and-board expenses may include:⁶

• On-campus housing and meal plans
• Off-campus rent
• Utilities
• Food expenses

But limits apply. For students living off campus, the amount treated as qualified cannot exceed the school’s published cost-of-attendance allowance for room and board.⁷

For example, if a college’s annual off-campus housing allowance is $15,000 but a student spends $19,000 on rent and food, only $15,000 would typically qualify for tax-free treatment.

It’s also important to keep documents such as lease agreements, grocery receipts, and school meal plan bills in case records are needed later.

Eligible K-12 expenses for 529s

529 plans can also be used for certain K-12 education expenses. Beginning in tax year 2026, families can withdraw up to $20,000 per year, per student to pay for certain costs at public, private, or religious schools at elementary and secondary levels. That’s up from the $10,000 limit for tax years 2025 and earlier.

Tuition qualifies for K-12 education, as does books and fees, tutoring, and support for diagnosed learning conditions, such as ADHD. Other K-12 expenses — such as transportation, computers, room and board, and extracurricular activities — generally do not count as qualified expenses under federal 529 rules.

Some states follow federal tax treatment for K-12 withdrawals, while others may offer limited or no state tax benefits. Because state laws continue to change, families should verify how their state handles K-12 withdrawals when considering 529 distributions.

Read more: The big changes to 529s in the 2025 spending bill

Apprenticeships, credential programs, and student loans

Outside traditional college programs and K-12 learning, 529 withdrawals now cover certain workforce and professional training. Qualified apprenticeship expenses for 529 withdrawals may include fees, supplies, and equipment, for programs registered with the U.S. Department of Labor.⁸

Some professional certification and credentialing programs also may qualify as 529 expenses if they are offered through eligible educational institutions or approved apprenticeship or workplace programs.⁹

529 funds can also be used to repay qualified student loans, subject to a lifetime limit of $10,000 per person. An additional $10,000 may also be used for each sibling of the beneficiary.¹⁰

What expenses are not qualified for a 529 plan?

There are many expenses a student may incur that are not considered qualified expenses by the IRS. Withdrawals made from a 529 account to pay for them could be subject to income taxes and 10% penalty on the earnings portion.

Common nonqualified expenses include, but are not limited to:¹¹

• Travel, transportation and parking
• Health insurance
• Medical expenses
• Club dues and extracurricular activities
• Cell phone bills and streaming services

It’s good practice to consult IRS guidelines and your 529 plan documents for a full breakdown and to double-check what expenses are covered; not everything you think is “education-related” may qualify.¹²

Keep track of qualified 529 expenses

Keeping organized records can help families avoid tax issues when taking 529 withdrawals. The IRS recommends saving documentation showing that distributions were used for qualified education expenses, including receipts, tuition bills, canceled checks, enrollment records, and meal plan statements.¹³

Timing matters, too. The qualified expense and the 529 withdrawal should occur in the same calendar year. For example, if tuition is paid in December but the 529 withdrawal is not taken until January, the IRS could treat the distribution as nonqualified for the earlier expense year.

What happens if 529 money is used for nonqualified expenses?

When a distribution is used to pay for nonqualified expenses, the earnings portion of the withdrawal is subject to income tax along with a potential 10% penalty on earnings (not contributions).

There are limited exceptions where all or part of the 10% penalty may be waived, such as:¹⁴

• The beneficiary receiving certain tax-free scholarship or grants
• Attendance at a U.S. military academy
• Disability
• Death of the beneficiary

Read more: 529 withdrawal rules: Taxes, penalties, and how it works

How to decide which education costs to pay with a 529

529 funds do not necessarily need to be spent immediately — or even by the original beneficiary. In some cases, families may choose to keep unused funds invested for future education expenses, change the beneficiary to another eligible family member, or explore options such as a 529-to-Roth IRA rollover if the account qualifies.

For families using 529 savings now, a thoughtful withdrawal strategy can help maximize tax benefits while preserving flexibility for future education needs. Here are some questions to ask when deciding which education costs to pay for with 529 funds:

• Does the expense qualify for tax-free 529 treatment?
  Start by identifying whether the expense meets IRS requirements for qualified education expenses, such as tuition, required fees, books, supplies, computers, and eligible room-and-board costs.
• Are scholarships, grants, or education tax credits involved?
  Before taking withdrawals, coordinate 529 distributions with financial aid and education tax credits. The IRS generally does not allow families to claim certain education tax credits — such as the American Opportunity Tax Credit — for expenses paid with tax-free 529 funds.¹⁵

Families should also review state-specific 529 rules before taking distributions. Many states offer income tax deductions or credits for contributions to a 529 plan. These incentives vary by state and which plan you choose, and in some cases may only apply to state residents. State tax treatment also varies; some states may recapture prior deductions or credits if money is rolled over or withdrawn for expenses the state does not recognize. Questions to consider include:

• Does your state follow the federal definition for K-12 tuition, student loan repayments, credentialing programs, and Roth IRA rollovers?
• Did you receive a state tax deduction or credit that could be recaptured after certain withdrawals?
• Does your 529 plan require additional documentation or specific withdrawal procedures?

Because 529 withdrawal rules can be complex, families may benefit from consulting a financial professional or tax advisor before taking distributions, especially when coordinating tax credits, scholarships, and long-term education savings goals.

Read more: What to do if you have an overfunded 529 plan

Frequently asked questions about 529 plan qualified expenses

What are qualified 529 plan expenses?

Qualified 529 expenses generally include tuition, mandatory fees, books, supplies, and certain room-and-board costs for eligible students at qualified educational institutions.

Can 529 funds be used for off-campus housing?

Yes. Off-campus rent and food expenses may be a qualified 529 expense if the student is enrolled at least half-time, and costs stay within the school’s published room-and-board allowance.

Can 529 plans pay for K-12 education?

Federal rules allow 529 plan withdrawals for certain K-12 tuition and related education expenses, subject to annual limits and state-specific rules.

Can 529 funds be used for study abroad?

They may qualify when the foreign institution is eligible to participate in U.S. Department of Education student aid programs, the program is eligible for academic credit, and the expense otherwise meets 529 rules. You should verify school eligibility before withdrawing.

Can a 529 plan be used to repay student loans?

Yes. Up to $10,000 in lifetime student loan repayments may qualify for 529 withdrawals per beneficiary, with separate limits available for siblings.

What expenses do not qualify for 529 withdrawals?

Transportation, parking, health insurance, medical expenses, extracurricular activities, and streaming services generally do not qualify for 529 withdrawals.

Can 529 funds be used for apprenticeship programs?

Yes. Qualified apprenticeship expenses for 529 plans may include fees, supplies, and equipment for programs registered with the U.S. Department of Labor.