Can You Use a 529 for Flight School?

A 529 plan is a savings account designed to encourage saving for future education costs. It offers tax advantages, meaning the money can grow without being taxed, and withdrawals for certain education expenses are also tax-free. These plans are sponsored by states, state agencies, or educational institutions and are officially known as “qualified tuition programs.” While traditionally associated with four-year colleges, their application has expanded over time.

Determining Flight School Eligibility

The usability of a 529 plan for flight training hinges on whether the school qualifies as an “eligible educational institution” under U.S. Department of Education standards. To qualify, an institution must be accredited and authorized to participate in federal student aid programs. Under this definition, most standalone flight schools are not eligible.

The most reliable way to fund flight training with a 529 plan is to enroll in an aviation degree program at an accredited college or university, as flight training costs required for the degree are considered qualified expenses. While legislation has been proposed to make FAA-certified flight schools eligible for 529 plans, it has not been passed into law. To confirm any school’s status, you can use the Federal School Code Search tool on the Free Application for Federal Student Aid (FAFSA) website.

Qualified Aviation-Related Expenses

Once you confirm the flight school is an eligible institution, the next step is to identify which specific costs can be paid with 529 funds, known as qualified higher education expenses (QHEEs). For aviation training, this includes tuition for ground school and fees for flight hours in an aircraft or simulator. Required items for the program are also covered if they are a condition of enrollment. These can include:

• Books
• A flight computer
• Charts
• A headset

The rules for covering room and board with 529 funds have a specific requirement. The student must be enrolled at least half-time for their housing and food costs to be considered qualified expenses. The definition of “half-time” is determined by the eligible educational institution itself.

Tax Implications of Distributions

The tax treatment of withdrawals from a 529 plan depends on how the funds are used. When you withdraw money for qualified higher education expenses at an eligible institution, the distribution is free from federal income tax. This tax-free treatment applies to both the original contributions and the investment earnings.

Conversely, if a withdrawal is used for any other purpose, it is a non-qualified distribution. This could happen if the flight school is not eligible or if the money is used for a non-qualified expense. The portion of the withdrawal that represents earnings is subject to ordinary income tax and an additional 10% federal penalty tax. For example, if a $10,000 non-qualified withdrawal consists of $4,000 in earnings, that $4,000 would be taxed as income and also incur a $400 penalty.

Making a Withdrawal for Flight School

There are generally two methods for making a withdrawal. You can arrange for the 529 plan administrator to pay the flight school directly, or you can pay the expenses yourself and then request a reimbursement from the plan.

Regardless of the payment method, you must keep records to prove the 529 funds were used for qualified expenses in the event of an IRS audit. This means saving all invoices from the flight school that detail charges for tuition, flight time, and fees, along with receipts for any required equipment.