9-29-10 Technology Expenses Make the Grade for Qualified Tuition Programs

Technology Expenses Make the Grade for Qualified Tuition Programs

Taxpayers who have opened a qualified tuition program, generally referred to as a 529 plan, can now count some additional expenses as qualified payments out of the plan. These items include computer equipment and internet access and related services. This relates to the tax years of 2009 and 2010. The beneficiary must use the technology while enrolled at an eligible educational institution.

Some things to know about 529 plans:

• It is an investment vehicle to help families pay for college. Contributions to the plan are not deductible, but there are other tax advantages.

• Earnings are not subject to federal tax when used for eligible college expenses. The plan can be opened by a taxpayer to benefit anyone. The beneficiary can be changed as long as the new beneficiary is in the same family. Contributors to the plan have no income restrictions. The plan owner controls the funds until withdrawal.

• Contributions cannot exceed the qualified education expenses of the beneficiary. Contributions to the plan, along with other gifts, should not exceed the annual gift tax exclusion of $13,000 in 2010 or the contributor may have potential gift tax issues.

Please let us know if you have any questions regarding this.

 
 
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