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529 Plans Pay for More Than Tuition and Books

Oct 24, 2012

If you're one of the smart parents that have opened a 529 College Savings Plan you know it's going to help you pay for tuition and books. But what other things can you use the money for? According to 529 plan rules, you are allowed to use the funds for qualified education expenses.

Some examples of qualified education expenses:

If you are attending classes in the medical field you can expect to spend money on required medical supplies. Whether you're attending radiology, general diagnostic medical sonography, dental hygiene, or practical nursing you can expect to pay more than $3,000 on supplies depending on which field you are studying in. Dental hygiene has the highest costs, totaling more than $3,000. Radiology students need less than $400 in supplies.

Equipment and supplies are the most overlooked expense when attending college or trade school, according to Upromise Investments Inc. Don't let the costs for needed equipment sneak up on you. Save the necessary money in your 529 plan.

To prepare for acquiring this equipment you need to find out exactly how much the equipment will cost.

1. Find equipment estimates on school websites: School websites' financial aid offices post cost of attendance estimates online, including estimates for tools and supplies. These estimates aren't exact, largely because students have purchasing options beyond the school bookstore. For instance, medical scrubs are also available from uniform shops.

During the application stage, parents and students should use these estimates to compare costs among different programs. After choosing a program, an exact supply list is needed, she says.

2. Get the required tools list: A few months before schooling begins, students should request complete lists of supplies from the academic department or individual professors teaching first year courses. If contacting professors, confirm with academic counselors that the tool list is the same no matter which professor teaches the class, experts advise.

Don't forget to ask if there are any restrictions that might limit product selection. For instance, is new or branded equipment required? Are there manuals specifically for student use that come with the tool? Do scrubs need to be a certain style or color to identify students working in a hospital environment?

3. Be wary of extravagantly priced products: While a $250 pair of riding boots may look spiffier than the $150 required version estimated in the cost of attendance for a horse training program, using 529 plan withdrawals to pay for the more expensive boots could result in an audit. He notes that 529 plans have restrictions on how families can allocate distributions.

Sometimes the IRS will fall back on the 'ordinary and necessary' (section 162) theory, essentially that expenses considered ordinary and necessary for a particular situation are deductible, while those considered 'extravagant' are not. Parents should err on the side of caution and not purchase the most expensive supplies and equipment, unless required by the educational institution.

4. Compare prices: Determine rules for buying new or used supplies. For instance, don't buy used scrubs because they're relatively inexpensive; a top and bottom set starts at under $20. However, she'll consider used tools from a company that verifies sterilization and good, working condition of tools.
Next, compare prices. The selection depends on the career training program. For instance, tools for an automotive mechanic may be bought from hardware or automotive repair retailers, tool shops, and websites. Medical equipment may be bought from a variety of online outlets, as well as medical supply retailers.

No matter where equipment is bought, don't stray from the required tool list. If you're unsure if the tool is the exact same one from the list, consult the academic department.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

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