CollegeAmerica® qualified education expenses
ARTICLE TAKEAWAYS
- What education expenses are generally considered qualified
- Tax implications if distributions are used for nonqualified expenses
Qualified education expenses are expenses incurred by a beneficiary while attending an educational institution. The CollegeAmerica owner or beneficiary is responsible for confirming an education expense is considered qualified and should review what IRS Publication 970 considers qualified. For higher education expenses, visit the Federal Student Aid website and use the Federal School Code Search to verify whether the school is an eligible educational institution by confirming it has a federal school code.
If distributions are used for purposes other than qualified education expenses, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. States take different approaches to the income tax treatment of distributions. For example, distributions for K–12 expenses may not be exempt from state tax in certain states. Your client should consult with a tax advisor for state-specific details and review the CollegeAmerica Program Description.
The following expenses are generally considered qualified:
Higher education
- Tuition and mandatory fees
- Required books, supplies and equipment
- The following computer technology equipment*:
- Computers or peripheral equipment (such as printers)
- Computer software
- Internet access and related services
* Must be used primarily by the beneficiary during the time enrolled at the eligible higher education institution
- Room and board for the time the beneficiary is enrolled at least half-time in a degree, certificate or other program (program must lead to a recognized educational credential)
For students living off campus: Distributions may be used to pay up to the amount determined by the school for the room and board allowance for students who live off campus in its Cost of Attendance for the academic term.
For students living with a parent or guardian: Distributions may be used to pay up to the amount determined by the school for the room and board allowance for students who live with a parent or guardian in its Cost of Attendance for that academic term.
- Services for a beneficiary with special needs
Student loans
Distributions may be used to repay a student loan of the designated CollegeAmerica beneficiary or their sibling (up to $10,000 over their lifetime).
Kindergarten through 12th grade
Distributions may be used for tuition for an elementary or secondary public, private or religious school (up to $10,000 during the taxable year per beneficiary).
Home school expenses are not considered a qualified education expense.
Apprenticeship programs
Distributions may be used for the following expenses associated with apprenticeship programs registered and certified with the Secretary of Labor under Section 1 of the National Apprenticeship Act:
- Fees
- Books
- Supplies
- Equipment
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