Is driving classes/courses a qualified expense that can be reimbursed by 529 plan?

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cflannagan
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Is driving classes/courses a qualified expense that can be reimbursed by 529 plan?

Post by cflannagan »

I know 529 plans cover trade school and postsecondary education but would something like a driving course (1-on-1 time with driving instructor on road) be considered a qualified expense: tax-free on the earnings portion of 529 plan distribution?

Thanks in advance.
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RickBoglehead
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Re: Is driving classes/courses a qualified expense that can be reimbursed by 529 plan?

Post by RickBoglehead »

No. Tuition only at a private school.

You also don't get to withdraw just earnings. Each disbursement contains principal and earnings.
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Re: Is driving classes/courses a qualified expense that can be reimbursed by 529 plan?

Post by cflannagan »

You also don't get to withdraw just earnings. Each disbursement contains principal and earnings.
Right, I get it. I'm just saying earnings portion on the distribution (which would include principal) would ideally also be tax-free. Which would be the case for qualified expenses.
No. Tuition only at a private school.
I'll accept that driving course isn't qualified expense. However, if you could, can you cite "tuition only" bit? My understanding is that it's not necessarily just tuition at a private school - it can be book & supplies, on-campus room /boarding, special needs equipment, and student loans ($10k limit for student loan).
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Re: Is driving classes/courses a qualified expense that can be reimbursed by 529 plan?

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cflannagan wrote: Fri Jul 23, 2021 4:59 am I know 529 plans cover trade school and postsecondary education but would something like a driving course (1-on-1 time with driving instructor on road) be considered a qualified expense: tax-free on the earnings portion of 529 plan distribution?

Thanks in advance.
My guess would be if they wanted to be a race car driver, a truck driver, or any other kind of professional driver, it would be. If they just need to drive to work, maybe . But that would be a hard sell to the tax people.
Last edited by dknightd on Fri Jul 23, 2021 9:04 am, edited 1 time in total.
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RickBoglehead
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Re: Is driving classes/courses a qualified expense that can be reimbursed by 529 plan?

Post by RickBoglehead »

cflannagan wrote: Fri Jul 23, 2021 8:54 am
You also don't get to withdraw just earnings. Each disbursement contains principal and earnings.
Right, I get it. I'm just saying earnings portion on the distribution (which would include principal) would ideally also be tax-free. Which would be the case for qualified expenses.
No. Tuition only at a private school.
I'll accept that driving course isn't qualified expense. However, if you could, can you cite "tuition only" bit? My understanding is that it's not necessarily just tuition at a private school - it can be book & supplies, on-campus room /boarding, special needs equipment, and student loans ($10k limit for student loan).
Tuition and fees would normally be what a school would bill together, which is covered. Books, supplies, and equipment, as well as the other items you listed, are covered, as well as required expenses. Driver's education is not tuition, nor is it required, it's elected by a parent and student, usually because it gives an insurance discount if completed, or in some cases may be required by the state. Therefore, it's not covered.

https://www.irs.gov/pub/irs-pdf/p970.pdf


Qualified Elementary and
Secondary Education Expenses

These are expenses related to enrollment or attendance at an eligible elementary or secondary school. As shown in the following list, to be qualified, some of the expenses must be required or provided by the school. There are special rules for computer-related expenses.

1. The following expenses must be incurred by a designated beneficiary in connection with enrollment or
attendance at an eligible elementary or secondary
school.
a. Tuition and fees.
b. Books, supplies, and equipment.
c. Academic tutoring.
d. Special needs services for a special needs beneficiary.

2. The following expenses must be required or provided
by an eligible elementary or secondary school in connection with attendance or enrollment at the school.
a. Room and board.
b. Uniforms.
c. Transportation.
d. Supplementary items and services (including extended day programs).
3. The purchase of computer or peripheral equipment, computer software, fiber optic cables related to computer use, or Internet access and related services is a qualified elementary and secondary education expense if it is to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is in elementary or secondary school. (This doesn't include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature.)
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Re: Is driving classes/courses a qualified expense that can be reimbursed by 529 plan?

Post by cflannagan »

Books, supplies, and equipment, as well as the other items you listed, are covered, as well as required expenses.
Thanks for posting a correction to your previous statement. Wanted to make sure the information presented is complete in case someone else searches and comes upon this thread.

You mentioned also, "private school only" in your original response what do you mean by that, private school?
Distributions aren't taxable when used to pay for qualified higher education expenses (including tuition at an elementary or secondary public, private, or religious school)
- https://www.irs.gov/taxtopics/tc313

It appears public school tuition (among other things.. room & boarding, etc) would be covered too. I know it doesn't help my case (it's not qualified expense for me). Just unsure what you mean by "private school only" distinction.
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Re: Is driving classes/courses a qualified expense that can be reimbursed by 529 plan?

Post by Jablean »

This would be when someone would use a UTMA. All sorts of fun things can be funded with it. However no tax benefits for anyone.
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Re: Is driving classes/courses a qualified expense that can be reimbursed by 529 plan?

Post by cflannagan »

Jablean wrote: Fri Jul 23, 2021 12:34 pm This would be when someone would use a UTMA. All sorts of fun things can be funded with it. However no tax benefits for anyone.
Well, yeah, probably not much in terms of tax benefits, other than there being no taxes on the earnings portion for the 529 distributions, as long as it is for qualified expenses. The 529 plan set up for our children have had at least a decade worth of growth in it, so the tax savings not having to pay tax on gains would be pretty substantial here.
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Re: Is driving classes/courses a qualified expense that can be reimbursed by 529 plan?

Post by secondcor521 »

cflannagan wrote: Fri Jul 23, 2021 9:44 am You mentioned also, "private school only" in your original response what do you mean by that, private school?
I think the other poster is a bit muddled on qualified expenses related to 529s.

529s originally were intended for college, and could generally be used for college tuition, books, supplies, equipment, fees, and room and board if the student was at least half-time. Oh, and some technology expenses and special needs services.

A recent law added the ability to use 529 for K-12 tuition up to $10K per year. Generally, of course, K-12 tuition is only charged at private schools.

So I think the other poster's references to $10K, tuition only, and private schools is a reference to this later K-12 addition to qualified expenses for 529s.

You can read all about what is a qualified educational expense for 529s in Chapter 8 of IRS Publication 970 (where they are called QTPs).
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