Question

Qualified, nontaxable distributions may be taken from a 529 plan for all of the following EXCEPT: a. Up to $10,000 per student per year for tutition at a public, private, or religious school for grades K through 12. b. Up to the annual contribution limit for an ABLE account holder, who is also the beneficiary of the 529 account, to be rolleded into the beneficiary's ABLE account penalty free c. The cost of a computer used by the beneficary of the plan during years the beneficiary is enrolled in an eligible institution d. Up to $5,000 per year for medical expenses for a beneficiary of the plan while attending a qualified education institution

Answer 1

The correct answer is “D” as explained below.

529 college savings plans are a good way to save tax and at the same time prepare oneself for the coming financial expenses.

529 plan is the college saving plan that has tax benefits and at the same time helps in investing in K-12 tuition cost in addition to the college cost.

Since 529 plan is for bearing the college fees, the expenses that are required to be made as a part of education and are specifically allowed are the part of non-tax distribution.

However distribution in case of medical expenses are not to be treated as the tax free distribution as these expenses are not for the education.

This does not makes any difference if the person is enrolled in education or not.