#529 qualified expenses irs how to

Your annual contributions to a 529 plan are not tax deductible at a federal level.Other than the $10,000/year withdrawal limit for K-12 tuition expense, all other 529 plan rules apply:

You may also trigger a 10% penalty on non-qualified withdrawals. If you withdraw funds for K-12 use and live in a state that doesnвЂ™t comply with the updates, you could be subject to state tax penalties or your ability to claim credits and/or deductions could be affected.

One caveat to applying distributions towards K-12 education expenses is that not all states are compliant with the recentВ changes. Assuming annual tuition costs of $10,000, a 5.5% school cost inflation rate and a 529 plan rate of return of 7.7%, your 529 plan would help cover 54% of your childвЂ™s total private K-12 tuition costs. You make an initial deposit of $15,000 and monthly contributions of $396 through 12 th grade.

#529 qualified expenses irs how to

Note that the only qualified expense that is stated in the rules is вЂњtuition.вЂќДЄs an example of how to use a 529 plan to pay for K-12 tuition, letвЂ™s say you open a 529 plan when your child is born.

Find a financial advisor or wealth specialistДҐ29 plan rules allow for up to $10,000 per year to be applied toward private elementary or secondary school tuition expenses.