Phil's
Personal Finance Tip of the Day:
What Is a 529 Expense? Take Our Test.
Not all college costs get the tax-free treatment. It pays to know the rules beforehand.
By ANNAMARIA ANDRIOTIS/The Wall Street Journal
Millions of parents invest in 529 plans to pay for their children's college educations. But when it comes time to pull the money out, be aware that not all the expenses Junior incurs on campus will qualify for the tax-free treatment that makes these state-sponsored college-savings plans so valuable.
Withdrawals from 529 plans are tax-free only if they are used to pay for so-called qualified higher-education expenses, as defined by the Internal Revenue Service. These include tuition and other fees required by the university, as well as room and board for students enrolled at least half time. Course requirements such as books, calculators and software are included, as are services for special-needs students.
If a parent takes out money for anything that doesn't meet the "qualified expense" criteria, the earnings portion of that distribution will be taxed as ordinary income and could incur a 10% federal penalty.
To read the entire article from The Wall Street Journal:
http://online.wsj.com/article/SB10000872396390444508504577593154186084524.html?mod=WSJ_PersonalFinance_PF14
Job 8:7 — Your beginnings will seem humble, so prosperous will be your future.
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