The Internal Revenue Service (IRS) states very clearly that a 529 plan is to be used to invest money as a way to pay for future education. The 529 plan main benefit is that you would not be able to save the same dollars else where and they be non-taxable. When it comes time to use the money you have saved in a 529, only certain expenses can be paid with that money.
Tuition and Expenses
You can pay for tuition and expenses related to an eligible college with money that you saved in your 529 plan. The Internal Revenue Service specifies an eligible school as just about any accredited public, nonprofit, and private post-secondary institution. Qualified disbursements are books, supplies or equipment essential to enroll or go to the institution.
As of 2010, computer technology is an expense that can to be paid for with 529 plan funds. This was added to the list of eligible expenses under the American Recovery and Reinvestment Act of 2009. Computer technology includes any computer and related equipment including a scanner or printer. These eligible expenses do not include software or entertainment devices.
Students with Special Needs and Expenses
If the individual using the 529 plan has special needs or needs special services to go to school, those expenses are eligible, according the the Internal Revenue Service. The special needs must be related to being enrolled at an eligible educational institution. An example of an eligible expense would be the cost associated with making a room handicapped-accessible for a student living in a dorm, if the school hasn't already adequately done so. Also electronic or services that allow the student to perform their studies better.
Housing and Living expenses
The Internal Revenue Service permits you to spend the money saved and earned in a 529 plan to pay for room and board as long as the student is enrolled at least half-time. Notwithstanding, there are some limitations. The amount spent on room and board must be no greater than the amount determined by the institution as the allowance for room and board, or the actual amount charged for room and board by the institution for institution-owned housing. Otherwise, the expenses may not be eligible.