ESA withdrawals are completely tax free as long as you use the money
for qualified expenses for students enrolled in an eligible program.
Luckily, the list
of qualified expenses is pretty expansive - it includes everything from breast pumps to guide dogs.
Account owners can treat K - 12 withdrawals
as qualified expenses with respect to the federal tax benefit.
If you're in a 25 % tax bracket, you'll pay a total of $ 1400 because you failed to use all the money
on qualified expenses.
Your page says that room and board are 529 -
qualified expenses if the student is attending college half - time or more and the room and board are paid directly to the college.
The medical expense tax credit is a non-refundable amount for
certain qualifying expenses that can be claimed on the return of the patient and / or other supporting family members.
Savings can be used for
qualified expenses at eligible public or private colleges, universities or vocational schools.
If your child wants to study abroad but you're worried about paying for college overseas, a 529 may help
cover qualified expenses.
Qualified expenses also include student activity fees, fees for books and other fees that are required as a condition of enrollment.
Most qualified expenses can not exceed the cost estimates made by the school that the 529 beneficiary will be attending.
However, unless you have a large amount
of qualifying expenses, you might be better off taking the standard deduction, as most taxpayers do.
If you don't spend the money
on qualified expenses, you'll get hit with income taxes after the money is spent.
If you and your spouse are both educators and file jointly, then you can deduct up to $ 500
in qualified expenses.
That makes your retirement account fair game for funding
certain qualified expenses, such as first - time home buying and some health care or educational costs.
You can use the money for
qualified expenses at elementary and secondary schools, as well as colleges — whether private, public, secular or religious.
In fact, many people mistakenly claim some of these expenses only to find that they are
not qualified expenses, which can result in unexpected tax penalties.
Qualified expenses include tuition and fees; room and board; books, supplies and equipment; and other necessary expenses such as transportation.
Specifically, 529 accounts can now be used to pay
for qualified expenses in K - 12 schools, including private schools and religious schools.
Taxpayers with AGI of $ 15,000 or less can claim 35 % of
qualified expenses up to $ 3,000 for one dependent child and $ 6,000 for 2, while taxpayers with AGI over $ 43,000 are limited to 20 %.
Several of the school facilities, incentive, categorical, and Lottery - funded account entitlements shown in Attachments C through F are funded on a reimbursement basis and represent the department's latest projections of those reimbursements; however, final payments on these accounts in fiscal years 2010, 2011, and 2012 will be based on
actual qualifying expenses submitted to the department.
The IRS does not require you to
reduce qualified expenses by any amount you pay with borrowed funds, such as student loans or credit cards.
Several of the school facilities, incentive, and categorical account entitlements shown in Attachments C through F (Group II, III, and IV accounts) are funded on a reimbursement basis and represent the department's latest projections of those reimbursements; however, final payments on these accounts in fiscal years 2008, 2009, and 2010 will be based on actual
qualifying expenses submitted to the department.
Additional qualifying expenses include costs related to before - and after - school care for children under 13 and expenses related to a nurse, home care provider, or other care provider for a disabled dependent.
If you paid tuition or other
qualifying expenses during the tax year, the school will send you Form 1098 - T, the Tuition Statement.
Taking the standard deduction is the easiest and most common method chosen by filers, but many taxpayers may wind up paying less tax if they
itemize qualified expenses.