WTF Friday (aka Jargon Alert): QEE or “Qualified Education Expenses”
By Patrick Diamond, CFP®
TL;DNR:
Using 529 College Savings Plans as a tax-advantaged way to keep up with tuition inflation makes a lot of sense but you need to follow the “qualified education expenses” rules.
What Are “Qualified Education Expenses” in a 529 Plan?
If you’re saving for a child’s education (as a parent or grandparent), you’ve probably heard that a 529 College Savings Plan offers tax-free growth as long as the money is used for “qualified education expenses.” But what exactly does that mean? And why does it matter? Here’s a simple breakdown.
The Big Picture
A 529 plan is a special type of investment account designed to help families save for education. The key benefit is that your earnings grow tax-free—and stay tax-free—when withdrawals are used for qualified education expenses or “QEE”. These are certain costs that the IRS has approved. Use the 529 account money for something outside this list, and you may owe taxes and a penalty on the earnings.
Starting in 2026, federal rules allow you to withdraw up to $20,000 a year (up from the previous limit of $10,000) from your 529 to pay for K-12 tuition (state tax rules may vary). In addition to tuition, the 2025 Tax Act also adds new qualified K-12 education expenses, including books, tutoring, standardized tests, and more.
What Counts as a Qualified Education Expense?
Think of qualified expenses as the core costs required for attending an eligible college, university, or certain other educational programs. These typically include:
1. Tuition and Fees
This is the most straightforward category. Whether it’s a four-year university, community college, trade school, or certain international institutions, tuition and mandatory fees count.
2. Room and Board
If the student is enrolled at least half-time, 529 funds can cover on-campus housing and meal plans. Off-campus housing also qualifies, but only up to the school’s official room-and-board allowance listed in its financial aid budget.
3. Books, Supplies, and Equipment
Think textbooks, required software, and lab supplies. If the school requires it for coursework, it usually qualifies.
4. Computers and Internet Access
Laptops, desktops, and related technology are covered as long as they’re used primarily for education. Internet service also qualifies.
5. Special Needs Services
If a student requires adaptive or special-needs services to attend school, those expenses generally qualify as well.
Additional Uses That Qualify
529 plans have expanded in recent years, allowing for more flexibility:
K–12 tuition: Up to $10,000 per child per year (going up to $20,000 in 2026) can be used for private K–12 school tuition. NOTE: State tax laws may vary.
Apprenticeship programs: Fees, books, and tools for registered apprenticeship programs now qualify.
Student loan repayment: Up to $10,000 (lifetime limit per beneficiary) can be used to repay student loans.
Expenses That Do Not Qualify
Some education-related costs fall outside the IRS rules:
Transportation and travel
Sports or activity fees that aren't required for coursework
Health insurance
Dorm furnishings and décor
Optional equipment or supplies not required by the school
Using 529 funds for these items may trigger taxes and a 10% penalty on investment earnings.
Why It Matters
Understanding qualified expenses helps you make the most of your 529 plan’s tax benefits. The rules are generous, but the IRS still expects the funds to be used for true educational needs. With a little planning, families can stretch their 529 dollars farther and avoid unexpected tax bills.
Final Thoughts
529 plans are powerful tools for education savings. Knowing what counts as a qualified education expense ensures you’re getting the maximum benefit—tax-free growth to help you keep up with tuition inflation.
[Below is a screenshot from Morningstar’s 2025 review of 529 Plans]
Source: Morningstar available at: https://www.morningstar.com/personal-finance/morningstar-529-ratings-best-plans
*Disclaimer: This blog post and all blog posts are for educational and informational purposes only. Nothing in this blog post constitutes tax advice or investment advice.