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What Are Qualified Educational Expenses?

Kimberly Lankford

To use money from a 529 plan tax free or to receive the Hope or Lifetime Learning tax credits, you need to know which college-related costs are eligible.



What are considered qualified educational expenses for 529 college-savings plans and for the Hope and Lifetime Learning tax credits?

You can use money from a 529 plan tax free for tuition, fees, books, supplies and equipment required for enrollment at any accredited college, university or vocational school in the U.S. and at many foreign colleges.

You also can use the money for room and board, as long as the beneficiary is at least a half-time student. The full cost of room and board counts if the student's housing is owned or operated by the college. Off-campus housing costs can qualify, too, up to the allowance for room and board that the college includes in its cost of attendance for federal financial-aid purposes (your college financial-aid office can give you that figure).

There's one big difference in the expenses that are eligible for the Hope and Lifetime Learning credits: Tuition and required fees count for the write-off, but room and board do not.

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For details about the tax rules, see IRS Publication 970, Tax Benefits for Education. For more information, see Everything You Need to Know About 529s and our new Paying for College center. Also see Best Ways to Cash In College Accounts for advice on withdrawing money from your 529 without jeopardizing your eligibility for the Hope and Lifetime Learning credit.

Got a question? Ask Kim at askkim@kiplinger.com.




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