Ask Kim
529 Money for College Expenses Only
But you can use money from a Coverdell education savings account for primary- and secondary-school expenses.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
March 11, 2010
Can you use money from a 529 college-savings plan to pay for private high school?
No, you can’t use money from a 529 tax-free to pay for private high school -- 529 money can be used tax-free only to pay for college tuition, fees, books, supplies and required equipment. College students can also use the money for a computer and Internet access in 2009 and 2010. For more information, see How You Can Use 529-Plan Money.
You may be thinking about the rules for Coverdell education savings accounts, which are more liberal than they are for 529s. You can use Coverdell money tax-free for college expenses as well as education-related expenses -- such as tuition, computers, software and uniforms -- for students in primary and secondary school.
For people who are thinking about saving in the future for primary and secondary education with a Coverdell, there’s a fly in the ointment: Unless Congress changes the law, starting next year withdrawals can’t be used tax-free for anything but college. Although some members of Congress want to extend the more liberal treatment, it’s unclear what lawmakers will do. But no matter what Congress decides, Coverdell money can still be used tax-free for primary- and secondary-school costs through December 31, 2010.
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Reader Comments (5)
Posted by: Jim Smith at 03/12/2010 09:19:05 AM
Ask Kim, I bought a stock in 1984. Unknown to me, the company liquidated at a later unknown date. I was never sent notice of liquidation, date of liquidation, or tax form 1099B. For tax season 2009, I decided to take the loss on my tax return, however my CPA tax preparer told me that I can only take the loss in the year of the loss. Since neither the company nor the brokerage firm exist to get a 1099B tax form, am I out of luck for claiming the loss on my taxes?
Posted by: Al Ottinger at 03/13/2010 11:46:50 AM
Kim, If a person takes an early withdrawal from an IRA, when are the tax penalties actually subtracted from the gross amount of the withdrawal? Is the 10% early withdrawal taken right away or at the end of the year at tax time, along with the regular tax and the State tax?
Posted by: Ms. Averill at 03/13/2010 12:57:15 PM
I live in Maine and sold some land in 2009. I'm not sure how to put this on my tax form. Can you help me?
Posted by: Gerald at 03/14/2010 03:46:43 AM
I would like to start investment accounts for my three grandchildren's education. Is it possible to have an account that (in addition to) myself, their other grandparents and aunts and uncles can contribute and also get a tax deduction, perhaps a 529 or an IRA? I am also unsure who should administer the account, myself of their parents.
Posted by: Tammy at 03/15/2010 11:40:56 AM
My daughter is attending school in another state. She made 391.88 in wages in 2009 and paid 11.76 in state taxes. Do I need to file taxes in both ND (her residence) and IL?