Qualified Higher Education Expense

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Definition of 'Qualified Higher Education Expense'

A qualified higher education expense is an expense that is eligible to be paid for with tax-free money from a 529 plan or Coverdell Education Savings Account (ESA). Qualified expenses include tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. They also include room and board, as well as expenses for off-campus housing, if the student is enrolled at least half-time.

The amount of qualified expenses that you can claim each year is limited to the amount of money that you contribute to your 529 plan or ESA. You can also claim up to $10,000 in qualified expenses per year for each of your children, even if you don't have enough money in your 529 plan or ESA to cover the full amount.

If you withdraw money from your 529 plan or ESA to pay for qualified expenses, the earnings on your contributions will be tax-free. However, you will have to pay income taxes on any earnings that you withdraw to pay for non-qualified expenses.

It's important to keep track of your qualified higher education expenses, as you'll need to provide this information when you file your taxes. You can also use the IRS's 529 plan and ESA tax worksheets to help you calculate your tax liability.

Here are some additional things to keep in mind about qualified higher education expenses:

* Qualified expenses must be incurred by the student who is the beneficiary of the 529 plan or ESA.
* Qualified expenses must be paid directly to the educational institution.
* Qualified expenses cannot be reimbursed by any other source.
* Qualified expenses cannot be used to pay for room and board if the student is not enrolled at least half-time.

If you have any questions about qualified higher education expenses, you should consult with a tax advisor.

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