<p>Can anyone tell me the IRS' rules as to what can be legitimately paid for with 529 funds? Tuition, room & board, fees, books: obviously.</p>
<p>What about a laptop? Travel to/from school? </p>
<p>Thanks!</p>
<p>Not sure about travel expense but yes for computer equipment as long as it is educationally related. Below is the exact wording:</p>
<p>The purchase of computer technology, equipment, or Internet access and related services if it is to be used by the beneficiary and the beneficiary’s family during any of the years the beneficiary is enrolled at an eligible educational institution. (This does not include expenses for computer software for sports, games, or hobbies unless the software is predominantly educational in nature.)</p>
<p>
That appears to be from the 2010 version of IRS Publication 970. [Publication</a> 970 (2010), Tax Benefits for Education](<a href=“http://www.irs.gov/publications/p970/ch08.html]Publication”>http://www.irs.gov/publications/p970/ch08.html)
But the law changed for 2011 and later years, and the special rule for computer technology no longer applies. 26 U.S.C. 529(e)(3)(A).
The 2011 version of IRS Publication 970 allows for room and board, expenses for special needs services, and:
The following expenses must be required for enrollment or attendance of a Designated beneficiary (defined later) at an eligible educational institution.
a. Tuition and fees.
b. Books, supplies, and equipment.</p>
<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a> at p. 55</p>
<p>So it looks like a computer would be covered only if it was “required” by the college.</p>
<p>Couldn’t resist.</p>
<p>[Dell</a> Vostro 3450 14" i5-2410M Laptop $529](<a href=“http://dealsea.com/view-deal/51922]Dell”>http://dealsea.com/view-deal/51922)</p>
<p>:D</p>
<p>But don’t forget sales tax.</p>
<p>lol @ latichever, when I first saw the title, that’s exactly what I was thinking. “Why you can get a nice laptop for $529”</p>
<p>I knew this was the place to come to for answers, tongue-in-check or otherwise!</p>
<p>Based on the IRS doc cited by mokusatsu I’ll take the answer as NO.</p>
<p>^I think it is not a “NO”, but rather it is a yes only if the said equipment is required by the college.</p>
<p>Oh no, this is terrible!</p>
<p>D’s old desktop system has been limping along this year, with her parents holding off on replacing it on the expectation we could buy her a nice new laptop for college, out of 529 dollars.</p>
<p>Surely nobody at the IRS thinks that a computer isn’t necessary equipment for a college student?</p>
<p>some colleges require computers</p>
<p>Last year we used 529 funds to buy a laptop for son at college. We were told from several sources such funds could be used for college since everything is via computer these days (lectures; moodle discussion; etc.) We did not get hassled by IRS in doing our taxes</p>
<p>Not that you should do anything unkosher with the 529 money, but I got the impression that oversight is not the most stringent. We are considering tapping some of our 529 money, and I called the state agency that oversees it. They said I could simply set up a transfer from our 529 account to our bank account. I asked how do you know the money goes for legitimate educational expenses. They said to be able to document with receipts or whatever our educational expenses. I asked how do you know that the 529 money went specifically for education, and he didn’t know exactly how to answer that except to say that our withdrawals from the 529 should not exceed legitimate education expenses. He seemed to imply there wasn’t a specific audit trail needed leading from 529 withdrawal to a particular expense. Seemed kind of loose to me. I had been naively, I guess, under the impression that withdrawals from 529 would go directly to the covered educational expense, but they would go into our fungible bank account.</p>
<p>
Not yet. :p</p>
<p>weatherga–we have yet to visit a school that doesn’t have several well stocked computer labs. No, a laptop isn’t “essential” however is sure is a lot easier to have your own computer. We have also yet to come across a college that requires students to have laptops. Some programs have “strongly suggested” students have a certain program available to them but also follow up by saying the computers in the labs have what kids need.</p>
<p>Now, I don’t know of a single college student that doesn’t have their own laptop or pc :D.</p>
<p>Virgina Tech requires engineering students to have tablet pc plus engineering software bundle.
[Computer</a> Requirement For Summer/Fall 2011 and Spring 2012 Entering Students | <a href=“http://www.eng.vt.edu%5B/url%5D”>www.eng.vt.edu](<a href=“http://www.eng.vt.edu/it/requirement]Computer”>Engineering Computer Requirement | Engineering | Virginia Tech)</a></p>
<p>We made the mistake of paying the college ourselves for tuition and room and board and then reimbursing ourselves by withdrawing the funds from our 529.</p>
<p>A while after the tax year was over, we did hear from our friends at the IRS and they did ask for documention to support the withdrawal from the 529. We sent them supporting documents and that was the end of the matter. (Not a lot of fun, though.)</p>
<p>We have now found out on CC that if we had the 529 plan send the payment directly to the college, that the IRS would not have questioned it.</p>
<p>So don’t be surprised if you buy a laptop with 529 funds and then get a letter from the IRS in a year or two. (Of course, our withdrawal was for tens of thousands of dollars - maybe a small withdrawal for a laptop would be under the IRS’s radar.)</p>
<p>It seems to me that it’s reasonable to call a laptop “required equipment.” And I think that some of these expenses are discretionary by their nature. If my son buys the optional study guide for calculus, will I get in dutch with the IRS for buying it with 529 money? Of course not. It’s as legitimate a purchase as the calc text itself, but is not “required by the institution.”</p>
<p>This, plus the loosey-goosey enforcement alluded to by latichever makes me think the chances of being in trouble for this purchase to be very slim.</p>
<p>I think the wording in the IRS doc leaves a lot to be desired. I think it should speak more to the equipment being used primarily for educational purposes than being “required.”</p>
<p>It is Congress that says the equipment has to be “required,” whatever that means.</p>
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</p>
<p>I looked into this. It must be “required for enrollment or attendance.” Period.
Write your congressman, though, to get the law changed back. It won’t hurt them any.</p>
<p>Does anyone have 2 hours to sit on hold with the IRS to clarify this? I think it is an important clarification.</p>