All 529 plans cover qualified higher education expenses such as tuition, room and board, computers, books, supplies and special needs services. In addition, some state plans can be used to pay for apprenticeship programs, K-12 tuition or student loans. Key takeaway: Investment earnings and withdrawals going toward any of these expenses are free from federal taxes, but state taxes may apply with some 529 plans.*
* Earnings on federal non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. New York State tax deductions may be subject to recapture in certain additional circumstances such as rollovers to another state’s 529 plan, withdrawals used to pay elementary or secondary school tuition, or qualified education loan repayments as described in the Disclosure Booklet and Tuition Savings Agreement. State tax benefits for non-resident New York taxpayers may vary. Tax and other benefits are contingent on meeting other requirements. Please consult your tax professional about your particular situation.