CollegeAmerica qualified education expenses
ARTICLE TAKEAWAYS
- What education expenses are generally considered qualified
- Tax implications if distributions are used for nonqualified expenses
- Who is responsible for confirming an expense is qualified
Your clients’ CollegeAmerica® funds can be withdrawn free from federal tax for a wide range of qualified education expenses. Tax-advantaged treatment applies to savings used for qualified education expenses. State tax treatment varies. The CollegeAmerica account owner or beneficiary is responsible for confirming an expense is considered qualified. Owners and beneficiaries should review Internal Revenue Service (IRS) Publication 970, Tax Benefits for Education for more information on what the IRS considers qualified education expenses. For higher education expenses, visit the Federal Student Aid website and use the Federal School Code Search to verify the school is an eligible educational institution by confirming it has a federal school code.
Note: Clients should keep any receipts and documentation for tax preparation to prove their distributions were used for qualified expenses.
The following expenses are generally considered qualified:
Higher education expenses
- Tuition and mandatory fees
- Required books, supplies and equipment
- Computers, related equipment and services such as internet access fees and printers as long as they are primarily used by the beneficiary while enrolled at an eligible educational institution
- Room and board expenses, which may not exceed the following amounts:
- On campus: actual invoice amount for room and board
- Off campus and/or living with a parent or guardian: up to the applicable room and board portion of the Cost of Attendance as determined by the eligible higher educational institution
- Services for a beneficiary with special needs
- Amounts paid as principal or interest (up to a $10,000 lifetime maximum) on any qualified student loans of a designated beneficiary or the designated beneficiary’s sibling
Kindergarten through 12th grade
Previously limited to tuition, effective for distributions after July 4, 2025, qualified expenses now include the following expenses in connection with enrollment or attendance of the beneficiary at an elementary or secondary public, private or religious school up to a maximum of $10,000 (increasing to $20,000 for 2026) per calendar year per beneficiary:
- Tuition
- Textbooks and workbooks
- Tutoring services by eligible educators*
- Certain standardized testing fees (e.g., SAT, ACT, advanced placement exams)
- Dual-enrollment fees for college-level courses taken during high school
- Online educational materials
- Educational therapies for people with disabilities
Home school expenses are not considered a qualified education expense. However, some states may classify home school as a form of private school and may allow the use of 529 funds for certain home school expenses. Consult a tax advisor for state-specific details.
* The tutor must be a licensed educator, a current or former teacher at an eligible educational institution or a recognized subject matter expert. The tutor cannot be related to the student. The tutoring services must be academic in nature and provided in connection with enrollment or attendance at a public, private or religious elementary or secondary school.
Apprenticeship expenses and postsecondary credentialing and licensing expenses
Money may be used for the following expenses required for participation of the beneficiary in an apprenticeship program registered and certified with the Secretary of Labor under Section 1 of the National Apprenticeship Act:
- Fees
- Books
- Supplies
- Equipment
Effective for distributions after July 4, 2025, qualified education expenses are expanded to include a wide range of postsecondary (post–high school) credentialing expenses not offered by traditional colleges or universities. Covered expenses include but are not limited to:
- Tuition, fees, books, supplies and equipment required for the enrollment or attendance of the beneficiary in a recognized postsecondary credential program
- Testing fees and continuing education costs required to earn or maintain a recognized postsecondary credential
The program and credential must meet certain criteria, but examples of eligible expenses include:
- Professional licensing and certification fees, including costs related to CPA exam preparation and testing and bar exam registration and review
- Fees required for continuing education courses necessary to maintain certain professional credentials for careers such as nursing, teaching and real estate
Tax implications when money is used for nonqualified expenses
If money in a 529 account is 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, a distribution for K–12 expenses may not be exempt from state tax in certain states. Consult a tax advisor for state-specific details and review the CollegeAmerica Program Description for more information.
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