As families prepare for the financial realities of college, understanding how to make the most of a 529 plan can help reduce stress and stretch savings further. From tuition to textbooks—and even food—knowing what qualifies for reimbursement is key. With rising tuition costs and inflation, optimizing your education savings is more important than ever.
What Is a 529 Plan?
A 529 plan is a tax-advantaged savings account designed to help cover education expenses. Funds can be used for a wide range of qualified costs, but not everything counts—so it’s important to know the rules. For a broader overview, check out our College Savings Guide.
Tip #1: Know What’s Qualified
Qualified expenses typically include:
- Tuition and mandatory fees
- Required books and supplies
- Computers and internet access (if used primarily for school)
- Room and board (if enrolled at least half-time)
Recommendation: Keep syllabi and receipts together—if an item is required for the course, keep the proof.
New for K–12 (2025/26): Federal law expanded eligible K–12 529 expenses beyond tuition (e.g., curriculum, tutoring, test fees, certain therapies) effective July 5, 2025.
Those changes will then take effect beginning January 1, 2026, when the withdrawal cap will increase from $10,000 to $20,000 per student.
State conformity may vary—check your plan’s rules.
Tip #2: Understand Food Expense Rules
Parents often ask which food expenses qualify for reimbursement. Two factors drive eligibility:
- Where the student lives: on-campus vs. off-campus
- How meals are paid: through the school’s meal program vs. cash/debit off campus
Reimbursements for room and board (including meals) cannot exceed the lesser of:
- The room & board allowance in the school’s published Cost of Attendance; or
- The actual amount charged if the student lives in school-operated housing and uses the school’s meal program (e.g., meal plans, reloadable meal dollars).
See Appendix A for detailed examples.
Eligibility reminder: Students must be enrolled at least half-time for room and board (including meals) to qualify.
Tip #3: Tax Advantages & Common Pitfalls
- Tax-free growth & withdrawals for qualified expenses (federal; many states also offer deductions/credits for contributions).
- Non-qualified withdrawals trigger ordinary income tax and a 10% penalty on earnings.
- Coordination with scholarships: You may withdraw up to the scholarship amount without penalty (earnings still taxable).
Avoid this: Withdrawing in a different calendar year than the expense was incurred—this is a common audit trigger.
Want to know what to do with leftover funds? Read Rolling Over 529 Plan Assets to a Roth IRA.
Tip #4: Strategic Withdrawal Tips
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Match timing: Make withdrawals in the same tax year as the expense.
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Withdraw to the beneficiary or directly to the school for cleaner documentation.
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Don’t overdraw: Keep a running tally so total withdrawals never exceed qualified costs.
Tip #5: Coordination with Financial Aid
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529s owned by a parent are parent assets on the FAFSA (generally lower aid impact than student assets).
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Distributions can affect future-year income calculations for some aid forms—coordinate timing with your advisor.
Tip #6: State-Specific Perks
Many states provide contribution deductions/credits, matching programs, or additional benefits. Check your state’s 529 program details and consult your advisor to maximize incentives. For a deeper dive, see our College Savings Guide.
FAQ
- Can I use 529 funds for a laptop?
Yes—if the laptop is required for enrollment or coursework. Keep documentation. - Can I use 529 funds for off-campus housing and groceries?
Yes—up to the school’s published room & board allowance. - What if my child gets a scholarship?
You can withdraw up to the scholarship amount without the 10% penalty (earnings remain taxable). - Can I use my 529 for K–12 expenses?
Yes. Federal law now allows a broader set of K–12 expenses (not just tuition) starting July 5, 2025, and raises the K–12 annual cap to $20,000 per student beginning Jan 1, 2026, up from $10,000 in 2025. State tax treatment and plan rules may differ, so review your state’s 529 and consult your advisor.
Checklist — 5 Steps to Maximize Your 529 Plan
- Pull the school’s Cost of Attendance (keep a PDF).
- Track qualified expenses (tuition, required supplies, room/board) with receipts.
- Match withdrawal timing to the calendar year of the expense.
- Decide payee strategy (school vs. beneficiary) for clean records.
- Review state benefits and coordinate with financial aid and tax planning. Learn more in our College Savings Guide.
Related Resources
- Essential Legal Preparations for Parents of College Bound Students
- How Parents Can Save for College
- 10 Keys to a Successful College Experience for Students and Parents
- College Savings Guide
- Rolling Over 529 Plan Assets to a Roth IRA
- Financial Planning for New Parents
- How the Costs and Benefits of College Affect Financial Plans
Let’s Talk
If you want help reviewing your student’s expenses against Cost of Attendance, or you’d like a second set of eyes on withdrawal timing, contact us —we’re here to help.
Appendix A — Advisor Insight: 529 Meal Reimbursement Guidance
There are often questions about what food expenses are considered qualified for purposes of being reimbursed from 529 plans or Coverdell ESAs. It comes down to two key things to start:
First, is the student living on campus or off?
Second, how are the food expenses paid? This will determine the maximum qualified amount. The reimbursed costs cannot exceed the lesser of the following 2 amounts:
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The allowance for room and board included in the school’s cost of attendance for federal financial aid calculations.
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The actual amount charged if the student is living in housing operated by the educational institution AND expenses are incurred through the school’s meal programs (meal plans, reloadable “meal bucks” etc.)
Here are some examples:
1.) Britney is attending Wake Forest. According to the university’s posted Cost of Attendance, the expected annual cost for food is $7,000. The “Forestry” meal plan costs $3,500 per semester or $7,000 for the year. If Britney has this meal plan but also buys snacks or other grab-and-go items using cash or debit card that the meal plan doesn’t cover these costs are not considered qualified because they are not billed/paid through the school. However, if Britney has this meal plan and uses Wake Forest’s “Food Dollars” (reloadable gift card accepted at residential dining halls, retail locations, cafes, coffeehouses, restaurants, and convenience stores on campus), the expenses paid above the meal plan using the Food Dollars is considered to be qualified up to any amount.
2.) Madeline also attends Wake Forest but is living off-campus in an apartment. Madeline pays for all food and groceries using her debit or credit cards and is diligent about saving her receipts. Last year, Madeline spent $9,300 on food while at school. Since she is living off-campus, the maximum qualified amount that can be reimbursed from her 529 plan is $7,000 as this is the amount posted in WFU’s Cost of Attendance.
Keep in mind: In order for room and board expenses to be considered qualified for purposes of reimbursement, the student must be enrolled half time or more.
- Article posted on 8/19/25 -
Disclaimer
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information in this article has been sourced from irs.gov, my529.org, and accountinginsights.org.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
Prior to investing in a 529 Plan, investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
Beginning January 2024, the Secure 2.0 Act of 2022 (the "Act") provides that you may transfer assets from your 529 account to a Roth IRA established for the Designated Beneficiary of a 529 account under the following conditions: (i) the 529 account must be maintained for the Designated Beneficiary for at least 15 years, (ii) the transfer amount must come from contributions made to the 529 account at least five years prior to the 529-to-Roth IRA transfer date, (iii) the Roth IRA must be established in the name of the Designated Beneficiary of the 529 account, (iv) the amount transferred to a Roth IRA is limited to the annual Roth IRA contribution limit, and (v) the aggregate amount transferred from a 529 account to a Roth IRA may not exceed $35,000 per individual. It is your responsibility to maintain adequate records and documentation on your accounts to ensure you comply with the 529-to-Roth IRA transfer requirements set forth in the Internal Revenue Code. The Internal Revenue Service (“IRS”) has not issued guidance on the 529-to-Roth IRA transfer provision in the Act but is anticipated to do so in the future. Based on forthcoming guidance, it may be necessary to change or modify some 529-to-Roth IRA transfer requirements. Please consult a financial or tax professional regarding your specific circumstances before making any investment decision.
Investing involves risk, including risk of loss.
OP #25-0048
