Lewes CPA
officeProgar & Company, P.A.
Certified Public Accounting services for businesses and individuals
Qualified tuition programs—“529 plans”—enhanced in the American
Recovery and Reinvestment Act of 2009
Dear Reader,
If you have a child (or a grandchild) who is going to attend college
in the future you have probably heard about qualified tuition
programs, also known as 529 plans (for the Internal Revenue Code
section that provides for them), which allow prepayment of higher
education costs on a tax-favored basis. I am writing regarding a
provision in the recently enacted “American Recovery and
Reinvestment Act of 2009” (the Act) which enhances the flexibility
of 529 plans.
Under 529 plan rules, distributions from the program are tax-free if
they don't exceed the student's qualified higher education expenses.
These include tuition, fees, books, supplies, room and board (if the
student is enrolled at least half-time), and required equipment.
Under pre-Act rules, the cost of a computer doesn't qualify as an
eligible expense unless the computer is required by the college or
by a specific degree program or course. The new law changes that
rule to allow money from 529 plans to be used to purchase computers
and related technology. The change applies for 2009 and 2010.
I hope this information is helpful. If you would like more details
about this or any other aspect of the new law, please do not
hesitate to call.