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Student health fee for 529 and IRA exception
My daughter's college charges a $376 required Health and Wellness fee per semester. This is separate from Health Insurance. Is this a qualified expense for 529 and is this a qualified expense for an IRA withdrawal exception?
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Student health fee for 529 and IRA exception
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Student health fee for 529 and IRA exception
- Out of pocket expenses: As it stands right now, congress has not renewed the tuition and fees deduction. So there are no out of pocket qualified education expenses that can be deducted on the federal return. That may change before the tax filing deadline though. But at this point in time I wouldn't hold my breath waiting.
- Scholarships: Can be used to pay for the qualified education expenses of tuition, books, and lab fees. That's it with no exceptions. Though the category of "lab fees" is rather broad.
- Grants: Can be used to pay for the qualified education expenses of tuition, books, and lab fees. Can also be used to pay for other education related expenses provided those other expenses are specified in the grant. Note that if the grant generalizes (ie; says something like "other related expenses") that's not good enough. The grant must be specific. If it's not, then it only qualifies to be used for tuition, books and lab fees.
- 529 funds: Can be used for the qualified education expenses of tuition, books, and lab fees. Can also be used to pay for the unqualified but allowed expenses of room and board *provided* the room and board was paid for in direct support of the education. As an example, if the student did not enroll in classes for the summer semester, yet paid room and board for that period of time, then what was paid during that time was not in direct support of the education and is therefore not deductible against the 529 funds.
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Student health fee for 529 and IRA exception
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Student health fee for 529 and IRA exception
"Does that mean tuition and fees can not be used for 529 purposes? "
First, the way that reads some folks will interpret it backwards. 529 funds are not "out of your pocket" funds any way you look at it. Just like a scholarship is not out of your pocket.
Now take a look at IRS Publication 970 which is titled "Tax Benefits for Education". You can see it at https://www.irs.gov/pub/irs-pdf/p970.pdf Chapter 6 is titled "Tuition and Fees Deduction" and starts on page 39 of that document. The very first sentence in the first paragraph of Chapter 6 reads:
Tuition and fees deduction expired. The tuition and
fees deduction expired at the end of 2017.
Basically, that means any education expenses paid for out of "YOUR" pocket, are no longer deductible.
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