Can 529 Be Used for Trade School?

The 529 Dilemma: College or Trade School?

The rising cost of higher education has left many families struggling to afford college. As a result, more and more students are considering trade school as a viable alternative. But can 529 plans be used to pay for trade school?

The answer is: yes!

What is a 529 Plan?

A 529 plan is a tax-advantaged savings account that can be used to pay for qualified education expenses, such as tuition, fees, and room and board. 529 plans are offered by states and educational institutions, and they come in two main types:

• Prepaid tuition plans allow you to lock in today's tuition rates for future college expenses.
• College savings plans allow you to save money for future college expenses, and the earnings grow tax-free.

Can 529 Plans Be Used for Trade School?

Yes, 529 plans can be used to pay for trade school. The Tax Cuts & Jobs Act of 2017 expanded the definition of qualified education expenses to include expenses for "qualified apprenticeship programs." This means that you can now use 529 funds to pay for:

• Tuition and fees
• Books and supplies
• Tools and equipment
• Room and board

How to Use 529 Funds for Trade School

To use 529 funds for trade school, you will need to:

1. Choose a qualified trade school. Not all trade schools are eligible for 529 funds. You can find a list of qualified schools on the website of the College Savings Plans Network.
2. Open a 529 plan. If you don't already have a 529 plan, you will need to open one. You can do this through your state's 529 plan website or through a financial advisor.
3. Designate the trade school as the beneficiary of your 529 plan. Once you have opened a 529 plan, you will need to designate the trade school as the beneficiary. You can do this by logging into your 529 plan account and following the instructions.

Benefits of Using 529 Funds for Trade School

There are several benefits to using 529 funds for trade school, including:

• Tax savings. Earnings on 529 plans grow tax-free. This means that you can save a significant amount of money on taxes over time.
• Flexibility. 529 funds can be used to pay for a variety of expenses, including tuition, fees, books, and supplies. This gives you the flexibility to use the funds in the way that best meets your needs.
• Peace of mind. Knowing that you have a dedicated savings account for trade school can give you peace of mind. You can rest assured that you will have the funds you need to pay for your education.

Drawbacks of Using 529 Funds for Trade School

There are also some drawbacks to using 529 funds for trade school, including:

• Contribution limits. 529 plans have annual contribution limits. This means that you may not be able to save enough money to cover all of your trade school expenses.
• Early withdrawal penalties. If you withdraw money from a 529 plan before the beneficiary reaches age 59½, you will have to pay a 10% penalty on the earnings.
• Income limits. Some states have income limits for 529 contributions. This means that you may not be eligible to contribute to a 529 plan if your income is too high.

Is Using 529 Funds for Trade School Right for You?

Ultimately, the decision of whether or not to use 529 funds for trade school is a personal one. You should consider your individual circumstances, such as your income, savings goals, and the type of trade school you plan to attend.

If you are considering using 529 funds for trade school, it is important to weigh the benefits and drawbacks carefully. You should also talk to a financial advisor to get more information about 529 plans and to determine if they are right for you.