State Treasurer of Iowa

2 changes to 529 plans you need to know

There are now fewer things you need to worry about with 529 plans when it comes to withdrawals and contributions. New laws under the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), passed in December, included the following 2 changes that will benefit you. 

You can now withdraw money from a 529 plan to pay for computer-related expenses. Previously, 529 rules treated computers as qualified expenses only if a school required them as a condition of enrollment
But now, under the new law, computers or computer peripherals and related services are now considered qualified expenses--as long as the beneficiary is the primary user while enrolled at an eligible institution.
Account owners occasionally find themselves in the position of withdrawing money from a 529 plan, paying for an eligible expense, and then receiving a refund back for that expense. This could happen with tuition payments if a student gets sick and has to leave school during the semester, for example.
In the past, this would have been treated as a nonqualified withdrawal. However, you can now recontribute the refunded money to the 529 plan and avoid any taxes or penalties as long as you do so within 60 days of receiving the refund.
You don't need to report the recontributing on your tax return. But make sure to keep records of any refunds and contributions, in the event that the IRS asks about later.


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