With the updates in the 529 plan from the Tax Cut and Jobs Act, does anyone know if 529 plans can be paid for the AP tests?
529 funds can be used to pay for anything, but if you use a 529 to pay for AP tests, that will be considered an unqualified expense and the earnings portion of the distribution will be subject to tax (including the 10% additional tax).
Bette- you will regret chipping away at the 529 on relatively low end items. First, because as Belknap points out, you will be paying taxes on a portion of what you are taking out, and it just increases your record-keeping/paperwork for tax time without a lot of upside. And second- because the hard withdrawal is the very first one. After that you will get into the habit of using the 529 as your slush fund, and once your kid is actually enrolled in college, you will find that you REALLY need the money for the qualified expenses (i.e. tuition) and that you didn’t really need the money for AP tests, SAT tutoring, transportation to admitted students weekends, etc.
I think it’s a valid question if the OP has a senior who has been awarded a large scholarship to college and knows they have more in the 529 than will be spent on QEEs in college.
Yes…valid. But if it were me…I’d wait a bit to start spending on expenses that ar NOT QEE. One never knows what will happen. The student could lose that scholarship in the future…or need that money for grad school.
He’ll be doing a lot of tests. He has free community college for 2 years, thanks to the local college. he has to pay for a year and I will help pay for a year. He can do grad school on his own. I’m divorced and ex won’t be paying for anything. He’ll probably end up doing something with math like an actuary so he can pay back his loans .
But if it’s an unqualifed expense, I won’t do it. I’m seeing the tax accountant in a month, will ask him then. Thanks for all your replies
AP tests are NOT a qualified educational expense.
If your accountant tells you otherwise…I’d get a second opinion.
Can he get a part time job on the weekends? If you are low income, does he get free or reduced lunch in school? Sometimes the high schools have a program to waive or reduce the AP exam fees for low income students.
He can ask his GC.