I have 2 529 plans for my 2 kids. My questions are:
If DS1 is starting to apply this year, I infer that the laptop was not purchased for college attendance. Is that accurate? Was the other one purchased for college attendance?
My understanding is that, for secondary education, 529 funds can only be used for tuition.
K-12 education includes any kindergarten through 12th grade school - public or private. Note: only tuition is qualified up to $10,000 per year.
Post-secondary education includes college, university, trade schools, vocational programs, and registered apprenticeship programs.
Here’s what’s covered:
…
Technology Items – You can use a 529 plan to cover technological needs such as computers, printers, laptops and even internet service. These items must be used by the plan beneficiary while enrolled in college.
My read only - check with a tax professional for accurate advice.
Edit: here’s a more explicit explanation - How To Use A 529 Plan For Private Elementary And High School
parents need to be careful when using the 529 for elementary or secondary education. Parents may only use the money in these accounts to pay for private school tuition. Yes, just tuition.
Expenses such as computers, field trips, summer camps, etc., are not covered by this provision. Additionally, the law only covers distributions of up to $10,000 per year (for elementary and secondary education).
Any 529 accounts owned by a parent who must report financial information on a child’s aid applications must be reported, regardless of who the named beneficiary is.
If the oldest of your two kids is currently a high school junior, I would say that a laptop computer already purchased is not a 529 qualified expense. It’s too early.
Thank you both for clarification.
My worry is: My DS1 is Junior and DS2 is a Sophomore. If all the 529 money gets tagged to DS1, i may not have much left for DS2. Actual amounts are not big but wanted each to have their own college money.
We had separate accounts for all 5 kids, after a kid used up his or her 529, they took out loans. We were never eligible for FA.
Just because all the 529 money is reported on kid #1’s financial aid forms does not mean that it all must be spent on kid #1. Also, you could solve your apparent problem by transferring the ownership of the 529 that names kid #2 as the beneficiary to kid #2.
If I transfer 529 to DS2, will it be counted at higher percentage(20%) versus on my name(5.64%)? If yes, I will not be making any changes.
Also, DS1 will be most likely apply to UCs/Cal Poly(we are in CA), so we may not have much need for CSS profile but mainly for FAFSA.
529 accounts are assessed at the parent rate…not the student rate (right, @BelknapPoint ?).
Not sure why you mentioned the Profile.
Yes, student-owned 529 accounts are assessed at the lower parent rate on FAFSA. For schools that require Profile for institutional need-based aid, it will depend on the individual policy of each school.
There’s no rule that you have to use S2’s 529 for S1. Use it as you intend. Anyway, if, as you said, it’s a small amount it will not have much of an impact on any financial aid that might be forthcoming.
I transferred ownership of some of my 529 to my youngest daughter when her older sibling started receiving financial aid. I did this even though I realized there was some risks - 1) Youngest child, as owner, can just withdraw the money (even though this was a risk, I wasn’t concerned about this one). 2) May impact youngest child financial aid if she went to a Profile school that counted it as child asset.
I figured the guaranteed positive impact on financial aid on the older sibling was worth more to me than the possible impact on the youngest child. As it turned out, the youngest child is starting a state school this year and will not be receiving any financial aid. So, in my case it worked out.