College and 529

[LarryPSU]

My daughter is student teaching this academic year for college. She is driving 30 minutes each way to her assigned student teaching school. Can she pay for her gas out of her 529 account without having to pay taxes on the gains from the money used from her 529 account?

[MarianneK · Accepted solution]

Hello Larry, 

Thank you for participating today!

As I understand your question, you would like to know if 529 funds can be used for commuting fuel costs to her student teaching assignment? 

Unfortunately, transportation and travel costs are a non-qualified expense for a 529 Plan.    The 529 Plan can be used for tuition and fees, books and supplies, computers, software and internet access, room and board, and special needs equipment.

If your daughter is about to graduate, and there is money left in the 529 plan, here are a few ideas of what you can do with the money. 

1. save it for future educational needs. 
2. transfer it to another beneficiary
3. roll it over to a ROTH IRA - please consult an investment specialist
4. pay down up to $10,000 in student loans - see qualifications
5. withdraw it for a non-qualified expense.  

If you do a withdraw for a non-qualified expense, such as fuel for commuting, you would incur a 10% penalty and be subject to federal income taxes on the investment gain.   Also, some states also impose an additional state income tax on non-qualified withdraws.  

Here is a nice article for your review.  https://turbotax.intuit.com/tax-tips/college-and-education/information-on-529-plans/L0vrZiFuC