Buy a Computer with College Money
A new tax break lets you tap 529-plan savings.

Note: This article includeds a correction. The break cannot be used for students not yet enrolled at an institution of higher learning.
Is your college student nagging you for a new computer? If you’d like to oblige but think you can’t afford to, you may be surprised to learn that you may have a ready stash of savings you can use to buy that gift -- if you have a 529 college-savings plan.
Normally, you must spend your 529 funds on college tuition and other qualified expenses. The earnings portion of distributions not used for qualified college expenses is taxed and slapped with a 10% penalty.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But a new, temporary tax break allows you to use money in your 529 college-savings plan tax-free and penalty-free to purchase a computer for students enrolled in college or another post-high school institution. The tax break is available for 2009 and 2010 and also applies to computer software and Internet service. To qualify for the tax break, the software must be primarily educational. Sports or gaming software doesn’t qualify.
So you just might be able to grant that wish for a new laptop, netbook or desktop computer without breaking the bank . . . and with no tax consequences.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

-
Aging: The Overlooked Risk Factor
Sponsored Elder care is a personal and financial vulnerability many people fail to plan for.
-
AI vs the Stock Market: How Did Alphabet, Nike and Industrial Stocks Perform in June?
AI is a new tool to help investors analyze data, but can it beat the stock market? Here's how a chatbot's stock picks fared in June.
-
2025 SALT Cap Could Hurt Top 'Hidden Home Cost'
Tax Deductions The latest GOP tax bill might make hidden homeowner costs worse for you. Here’s how.
-
Retire in the Bahamas With These Three Tax Benefits
Retirement Taxes Retirement in the Bahamas may be worth considering for high-net-worth individuals who hate paying taxes on income and capital gains.
-
2025 Virginia Tax Rebate Checks Coming Soon? What to Know Now
Tax Rebates Given a historic 2025 gubernatorial race, tax policy will remain a key issue for Virginians in the months ahead.
-
Summer Backyard Ideas With Added Tax Benefits for 2025
Tax Tips Find out how these summer 2025 home projects can help you save on taxes next year.
-
Coverdell ESAs vs. 529 Plans: Which Should You Choose?
Savings Accounts These savings accounts can offer tax benefits for school and retirement expenses. Here’s how.
-
Homeschoolers Could Soon Save on Expenses With 529 Plans
Savings Accounts A new House GOP bill could change how you save for your child's homeschool education. Find out how.
-
Five ‘Big Beautiful Bill’ Tax Changes to Watch in the Senate
Tax Policy The House passed its version of Trump’s "One Big, Beautiful Bill." Here’s what to look for as Senate Republicans take up the mega legislation.
-
New GOP Car Loan Tax Deduction: Which Vehicles and Buyers Qualify
Tax Breaks To fulfill Trump's campaign promise, GOP lawmakers want to offer a tax deduction for car loan interest. How would it work?