Expenses that would taxed on a 529 plan are:
- College application and testing fees
- Transportation expenses
- Health insurance
- Extracurricular activities
Expenses used to generate federal education tax credits, such as the AOTC or the LLTC
Money withdrawn in excess of qualifying expenses or any expense that is not considered a qualified education expense will incur taxes.
If you pay expenses with 529 plans, you cannot claim a tuition deduction. You cannot claim the American Opportunity Tax Credit or the Lifetime Learning Tax Credit for the same expenses.
