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So what exactly are qualified education expenses? The IRS definition says "qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution." For those of you who own ESAs (Education savings Accounts also formerly known as Coverdell IRAs) there is slightly more flexibility with what items are considered qualified. For example you can withdraw funds for uniforms, computer technology, equipment and even software strictly for educational purposes. Other items covered are tuition, fees, books and supplies for children in Kindergarten through college. With 529 college savings plans uniforms are not on the list and funds can only be withdrawn for college.
The IRS recently made changes allowing withdrawals from 529 plans for purchasing of computer equipment, technology and even internet access while a student is enrolled at an eligible educational institution. Save the list from the school showing items your kids will need. Also hold onto the syllabus from the high school or college professors showing the books and supplies needed to successfully complete the course. Keep all receipts. I repeat, KEEP ALL RECEIPTS. This is the CYA portion folks. In case there are any questions or concerns you will have your back up.
Remember you can withdraw funds from your education plan federally tax free when funds are used for qualified education expenses. For additional information on qualified education expenses check out the following sites:
http://www.irs.gov/publications/p970/ch02.html#en_US_publink1000204337
www.savingforcollege.com
