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Test Your 529 Plan Knowledge
(Updated: 11/08/2016)

Which of the following is not a feature unique to 529 college savings plans?

  1. You can front-load a 529 plan with up to five years of gifts, up to the annual exclusion amount, in a single year.
  2. You can change the named beneficiary on an existing 529 plan to another member of the original beneficiary’s family.
  3. You can change the investment options in the underlying funds up to two times per calendar year.
  4. Funds can be used for any higher education expense incurred by a student.

Answer: D.

529 plan funds may be used only for "qualified higher education expenses." The IRS defines qualified expenses as those required for enrollment or attendance at an eligible educational institution, such as tuition and fees, books, supplies, and equipment. Expenses for room and board must be incurred by students who are enrolled at least half-time. The purchase of computer equipment, computer software, or Internet access and related services is included if it is to be used primarily by the beneficiary during any of the years he or she is enrolled at an eligible educational institution. (This does not include expenses for computer software for sports, games, or hobbies unless the software is predominantly educational in nature.) For more details, see IRS Publication 970, Tax Benefits for Education

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