Are College Application Fees 529 Eligible?
Understand if college application fees qualify for 529 plan funds. Get insights into eligible education expenses and accessing your savings.
529 plans help families save for educational costs with tax advantages. Investments grow tax-free, and withdrawals are tax-free when used for qualified education expenses. Understanding what constitutes a qualified expense is necessary to maximize the benefits of these accounts, including whether upfront costs like college application fees are eligible.
Eligibility of College Application Fees
College application fees are not qualified expenses for 529 plan distributions. IRS guidance specifies that these fees, incurred before a student’s enrollment, are not eligible. Using 529 funds for these costs results in a non-qualified withdrawal, subject to ordinary income taxes on earnings and a 10% federal tax penalty.
Acceptance or enrollment fees paid after admission are qualified expenses. These fees are directly tied to securing a spot and may credit towards the first tuition bill. As of July 4, 2025, fees for admissions testing, such as the SAT, ACT, and Advanced Placement (AP) exams, also became qualified education expenses.
Defining Qualified Education Expenses
A “qualified higher education expense” is an IRS-defined term for how 529 funds can be used. These expenses relate to enrollment or attendance at an eligible educational institution, including accredited colleges, universities, and vocational schools. Tuition and mandatory fees are primary qualified costs.
Qualified expenses also include books, supplies, and equipment required for courses. Computer technology, software, and internet access used by the 529 beneficiary during enrollment also qualify. For students enrolled at least half-time, room and board expenses are eligible, limited to the institution’s cost of attendance allowance.
Qualified expenses extend to K-12 education costs, allowing up to $10,000 per year per student for tuition at elementary or secondary schools. Fees, books, supplies, and equipment for apprenticeship programs registered with the Secretary of Labor are also qualified. Repayments of qualified education loans are eligible, up to $10,000 per designated beneficiary and an additional $10,000 for each of their siblings.
Accessing 529 Funds for Payments
When using 529 funds for qualified educational expenses, maintain meticulous records. Retain invoices, receipts, and payment confirmations for all expenditures. This documentation proves withdrawals were for qualified purposes, aiding IRS reporting. Understanding the institution’s cost of attendance is also helpful as a benchmark for eligible expenses.
To withdraw funds from a 529 plan, contact the plan administrator. Administrators offer online portals or forms for requesting distributions. Account owners can choose to have funds sent directly to the institution, reimbursed to themselves, or sent to the beneficiary. Coordinate withdrawals to occur within the same calendar year as qualified expenses to ensure tax-free treatment.
Upon withdrawal, the 529 plan administrator issues IRS Form 1099-Q to the recipient. This form reports the gross distribution, including earnings and principal. If any withdrawal is non-qualified, the earnings portion is subject to federal income tax and potential penalties, which must be reported on the tax return.