Tax Bill Would Expand Permissible Uses of Section 529 Funds

The new legislation would allow tax-exempt distributions from 529 savings plans to be used for additional educational expenses for elementary, secondary, or home schooling. Tax-free 529 distributions would be allowed for curriculum and curricular materials, books or other instructional materials, online educational materials, tutoring or educational classes outside the home, testing fees, fees for dual enrollment in an institution of higher education, and educational therapies for students with disabilities. The law would also allow 529 plans to be used to pay for “qualified post secondary credentialing expenses” in connection with “recognized postsecondary credential programs” and “recognized post secondary credentials”. As these terms are defined in the text, it seems that the law would permit taxpayers to access tax-free 529 plans to obtain a wider range of degrees, licensing and other specialized credentials. For more information on the rules governing 529 plans, visit Tax Facts Online. Read More: Link to Q687.