529 Money for College Expenses Only

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.

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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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As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.