140205_shoppingcart_electronics

Know What You Can Buy With 529 Savings Plan Distributions

Parents can pay for school via their college savings plans, but not all expenses are covered.

140205_shoppingcart_electronics
By SHARE

[Learn how to get textbooks for free.]

4. Keep separate receipts for money spent or reimbursed with a 529 distribution: Be careful about purchasing other items in the same transactions as qualified expenses, Washo says.

For instance, you don't want to provide a grocery store receipt to prove you were spending money for groceries within the allowed education expenses amounts if that receipt also includes things like hair products, alcohol or a blender, he says.

You would also want to be careful buying school T-shirts, hats and other school team gear from the school bookstore on the same receipt as textbooks. Keeping receipts separate and organized will make it easier to prove which expenses were paid for with 529 distributions, Washo says, in case of a tax audit.

Reyna Gobel, frequently quoted as an expert on student loans and college costs, is the author of "Graduation Debt: How To Manage Student Loans And Live Your Life" and "How Smart Students Pay for School: The Best Way to Save for College, Get the Right Loans, and Repay Debt." She has appeared on PBS's Nightly Business Report and speaks regularly at CollegeWeekLive.