Can I use 529 plan to pay for musical instrument for music performance major?

[jimspink]

My son is a graduate student - music performance major (viola).  I am wondering if we can use a 529 plan to pay for an upgraded viola under the category of ‘equipment’.   I looked on IRS website, but its not definitive on this.  The IRS no longer appears to provide answers to tax law questions outside of tax season.

[Opus 17]

I'm going to vote no.

You can include the cost of "Books, supplies, and equipment."  I think the presumption is that "equipment" means things that will be used up in the course of education (like a chemistry set), and not be a durable personal object that the student will own for years or maybe decades.

There is also a general principle called the "but for" rule that any personal expense can't be a tax deduction unless it would not have been incurred "but for" some other tax-deductible reason.  For example, you can take the cost of an emotional support animal as a medical expense if it is prescribed by a doctor, and if you would not have bought the animal "but for" your medical or emotional condition.  (That is, the only reason you bought the animal is for mental health, not personal pleasure.)    You can't deduct the cost of a trip to Florida as a business expense unless you would not have taken the trip "but for" the business.  (You can't deduct a 2 week vacation at Mouse World as a business expense if you spend one day meeting clients.  You can only deduct the extra costs incurred by the meeting that are over and above the costs of the personal vacation expense.)

So I think, if audited, the auditor would be asking you to prove that you would not have upgraded your child's instrument but for their enrollment as a music major.  That might be hard to argue.  You can't use education as an excuse to do something you already wanted to do and probably would have done anyway.  (Now maybe, if the student was a piano major and only had an electronic keyboard, and the school said they must have a baby grand, and you would not have done that otherwise because of the cost, and the expense of getting it into their apartment, and moving it after school, and depreciation, and generally the hassle of putting a baby grand in a loft apartment; you might have an argument.  But it would depend on the auditor.)

Not to mention, if you later sell the viola, you have a taxable event because you bought it with tax-free money, which is a whole other long and complicated issue.

But in case someone else has another opinion I'll leave this open.

[TomYoung]

I think that the upgraded viola might not pass muster.  There's all kinds of sites that purport to inform you of what a "qualified educational expense" is and is not and in terms of physical "stuff" these sites mention books, technology equipment and equipment required for "special needs" students which I'm sure is used to describe individuals who require assistance for disabilities.  I wonder if the college itself might not have somebody who has some experience in this area and might provide some guidance?

[jimspink]

Great input from both!  It does seem like this falls into the 'it depends on the auditor'.  And it makes sense that it would affect cost basis in a complicated way.

 I can't seem to figure out how to mark the comments recommended but I do recommend the answers.

[Opus 17]

Comments can't be voted but we can put a note here that this is solved.

Regarding cost basis, if your child becomes a professional musician and gets self-employment income (is treated as an independent contractor, at least for some jobs, and files a schedule C) they can depreciate the instrument at that time.  The basis for depreciation is either their cost basis, or the fair market value when placed in service, whichever is lower. The class life is 7 years, and this will reduce their taxable income for those years.  Of course, if they sell later, they have a gain, but because of the economic concept of "present value of money" it is usually better to take the deduction now even if you have to pay it back later (paying the deduction back with future money costs less in the long run because of inflation.)

Here is a longer answer I wrote on the same subject

https://ttlc.intuit.com/questions/3409228-should-i-deduct-entire-amount-or-depreciate-musical-instru...

We also haven't discussed the fact that the Lifetime Learning credit is 20% of the first $10,000 of tuition.  If your child pays more than that, you won't get anything even if you do list the instrument.  

All in all, I think you will be better off not trying to take the instrument as an education expense; that will preserve your child's ability to depreciate it as a business expense if they turn pro.   

[sahsjrotc13]

Let me refine the question and my situation.

My son has been accepted as a Music Major at WVU. He plays the bassoon. In high school the instrument is provided. In college it will not be. I have a letter from the Department Head stating that he MUST have is own bassoon to be in this major. Does this meet the requirement? I have read your earlier answers but this situation seems different to me. I liken it to using 529 money to buy a computer. The computer is required but will most likely be still good after 4-years (the student benefits post education for the use of the computer paid for with 529 funds).

[Carl]

. I have a letter from the Department Head stating that he MUST have is own bassoon to be in this major. Does this meet the requirement?

I would also expect this requirement to be in the course syllabus. But the letter on department or college letterhead will do just fine if audited. Many don't realize that in the "books, tuition, equipment" categories (they are three physically separate categories of qualified education expenses.) that the "equipment" category is rather broad. I have a daughter who was majoring in music (before she changed her major) and I can tell you hands down with 100% certainty that if it's a documented requirement of *any* *one* *course* in their course of study that is required for the certification or degree, then it falls in the equipment category and is therefore a qualified education expense. Additionally, the cork grease, reeds, and other things needed to maintain that instrument so that it continues to meet course requirements also falls in to the equipment category.

Also understand this is not limited to only 529 funds either. Remember, scholarships and grants can only be used for the qualified expenses of tuition, books, and *equipment*.

529 funds can be used for the qualified education expenses of tuition, books, equipment *and* the unqualified but allowed expense of room and board *provided* that room and board is in "direct support" of the education.