Can I Use 529 Funds During a Gap Year?

I've been thinking about taking a gap year before starting college and I was wondering if 529 funds can be used during that time. Are there restrictions on how you can use the money?

A 529 plan, also known as a "qualified tuition plan," is a tax-advantaged savings plan designed to encourage saving for the future higher education expenses of a designated beneficiary.

As for your question, a 529 plan can indeed be used to fund certain expenses during a gap year, as long as they are considered qualified higher education expenses. Qualified higher education expenses include tuition fees for enrollment or attendance at an eligible educational institution, which may also cover certain room and board expenses, and necessary supplies for enrollment or attendance. Certain apprenticeship program expenses and student loan repayments can also qualify.

However, if the funds are used for non-qualified expenses, such as travel or volunteering not associated with an accredited program, any earnings portion of the withdrawal will be subject to federal income tax and, typically, a 10% penalty.

Remember to plan carefully and consider seeking guidance from a financial advisor or the 529 plan provider to fully understand the extent and limitations of using a 529 plan during a gap year. Providing clear documentation and maintaining good records of how the funds are used will also be beneficial.