<p>My youngest is graduating from college this year and still has a few thousand dollars in his 529 plan. He's planning to head straight to graduate school in the sciences, has applied to several programs and already has one fully funded PhD offer in hand.</p>
<p>Last week he dropped and broke the display on his 4 year old laptop. He's using an external display for the remainder of this school year, but will need a fully functional laptop before he heads off to grad school in the fall. Searching the web to see if we can use the 529 funds to replace his computer has yielded contradictory answers - I saw in some articles it needs to be specifically required equipment through the program, which I doubt it is, and in others that the law has changed and that technology can now be purchased with 529 funds, and in yet another article I saw that the previously mentioned change was only temporary and no longer true.</p>
<p>Anybody out there know what the real story is? </p>
<p>Yes, that change was temporary and no longer true. Let’s go to the source:</p>
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<p>Page 56:</p>
<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
<p>The article is dated January 23, 2013 and is about tax year 2013 and we know it didn’t change for 2013. One of the comments mentions this not being accurate. I can’t find anything else that indicates that there is a change for 2014.</p>
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I think so. See Pub 970 page 56
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<p>There is currently legislation to allow the purchase of computers with 529 funds. </p>
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I don’t think it will pass anytime soon.</p>
<p>1.Even a fully-funded PhD program may have qualified expenses that aren’t covered for which the 529 can be used.
2. Are there any qualified expenses for 2014 for which you did not draw reimbursement from the 529 for which you could now draw reimbursement?
3. Could you check with the 529 plan trustee and find out how much earnings would be reported if you withdrew the balance (or part of the balance) for non-qualified purposes? If there is a penalty and taxes due, it is only on the earnings, not the return of principal. If you took out $1500 to buy a computer, it might turn out that you owed a minimal amount of additional tax anyway.</p>
<p>I think the new bill has a good chance of passing because they pulled out the part that would have had revenue implications. Plus there’s a greater understanding of the need for computers for all students. I agree that paying tax and penalty on the gain may still be worth it and less than the cost of the computer.</p>