Technology Expenses Make the Grade for Qualified Tuition Programs
September 9, 2009 – Special Edition TT-2009-06
Taxpayers who purchase computer technology for higher education purposes may be eligible for a special tax break. The American Recovery and Reinvestment Act of 2009 added computer equipment and technology to the list of college expenses that can be paid for by a qualified tuition program, commonly referred to as a 529 plan.
A qualified, nontaxable distribution from a 529 plan during 2009 or 2010 now includes the cost of the purchase of any computer technology, equipment or Internet access and related services. To qualify the beneficiary must use the technology, equipment or services while enrolled at an eligible educational institution.
Here are some things the IRS wants you to know about 529 plans.
- A 529 plan is an educational savings plan designed to provide tax-free earnings for the benefit of a student. Withdrawals must be used for qualified higher education expenses at an eligible educational institution.
- Qualified higher education expenses include tuition, reasonable costs of room and board, mandatory fees, computer technology, supplies and books.
- An eligible educational institution includes any college, university, vocational school or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education.
- Contributions to a 529 plan cannot be more than the amount necessary to provide for a student's qualified education expenses.
TaxACT products provide users the ability to mirror information from Form 1099-Q (distributed by each state program that issued a 529 distribution to you) and provides detailed interview questions to obtain additional information not reported on Form 1099-Q, but necessary to calculate the return. TaxACT also guides users through other state and federal tax benefits for education in its interview process.
For more information about 529 plans, see IRS Publication 970, Tax Benefits for Education. For more information on other key tax provisions of the Recovery Act, visit the official IRS Website at IRS.gov/Recovery and TaxACT's ARRA page at www.TaxACT.com/recovery-act.
- Tax Benefits for Education: Information Center
- Publication 970, Tax Benefits for Education
- Fact Sheet 2009-12, How 529 Plans Help Families Save for College; and How the American Recovery and Reinvestment Act of 2009 Expanded 529 Plan Features
- 529 Plans: Questions and Answers
- YouTube Video: English | Spanish | ASL
- Audio file for Podcast
- IR-2009-78, Special IRS Web Section Highlights Back-to-School Tax Breaks; Popular 529 Plans Expanded, New $2,500 College Credit Available