This week’s MoneyDo: Understand what you need to know before you make your August payment from a 529.


If you’re paying for your own or your child’s college education, you know that mid August is a key time for making a tuition payment.

Over the past few months, you’ve heard us discuss Wisconsins Edvest program. If you’re using in EdVest or a different 529 plan, now’s the time to understand what you should know or consider how to make a payment from your 529 plan.

If you aren’t acquainted, EdVest is a tuition program that helps families to invest for their children’s educational future.

EdVest allows individuals to open an account on behalf of a designated beneficiary. All contributions are then placed in a trust fund established by the State of Wisconsin and are directed into special investment portfolios designed and managed specifically for the program.

The best part is that because it’s a 529 plan, the earnings in the account will grow federal and state tax-free in Wisconsin, as well as potentially tax-free in other states, until the time the beneficiary is college bound. The funds are then available to be used to pay for qualified higher education expenses at any eligible school – including two and four-year colleges, technical, vocational, and graduate schools.

Here are four things you should think about before you make your August payment:


   1. Know how to ensure your withdrawal stays tax-free.

Qualified withdrawals are federal income tax free so long as the total withdrawals for the year don’t exceed your child’s adjusted qualified higher education expenses (QHEE).

To calculate these, add up tuition and fees, room and board, books and supplies, and any school-related special services, and then deduct any costs already covered by tax-free educational assistance


   2. Your 529 can be used to pay for expenses. Know what expenses qualify.

Tuition and fees are considered required expenses and are allowed, but when it comes to room and board, the costs can’t exceed the greater of the following two amounts:

The allowance for room and board included in the school’s cost of attendance for federal financial aid calculations
The actual amount charged if the student is living in housing operated by the educational institution

Textbooks count as an education expense, but only those included on the required reading for the course.

Computers and related equipment and services are considered qualified if they are used primarily by the beneficiary during any of the years that the beneficiary is enrolled at an eligible educational institution.

Computer software that is not predominately educational in nature would be excluded.


   3. It’s important that withdrawals you take from your 529 college savings account match with the payment of qualifying expenses in the same tax year.