Yep. You can use the funds in your account to help pay for computers, peripheral equipment (such as printers), software, or even internet access fees, so long as these tools and services are being predominantly used by the beneficiary while they’re enrolled at an eligible college or university.
Yes. You can use your account’s funds to pay for room and board expenses, but only for students who attend post-secondary schools (colleges, universities, etc.) at least half-time, and so long as the expenses don’t exceed the room and board allowance, determined by the school, that’s included in the cost of attendance.
Yes, you can use your account to pay for qualified expenses at some foreign schools, provided they are accredited and are eligible to participate in federal student aid programs. It’s best to contact your school directly to see if they qualify, but you can also refer to this list of eligible schools from the Department of Education by selecting “Foreign Country” under the state drop-down menu.
Yes, but there are state tax implications in Oregon. As of January 1, 2018, the IRS allows you to withdraw funds from your account tax free for tuition (up to $10,000 annually) at any public, private, or religious elementary or secondary school. But, although the federal tax break on money saved for K-12 tuition still applies, new state legislation has been passed that takes away the tax advantages of distributions made for K-12 education. Taxpayers will need to add back to their taxable income any amount of their K-12 distribution that received the Oregon state income tax deduction and any earnings on that distribution will also need to be claimed on their Oregon income taxes.
Just about every public, private, or non-profit college, university or vocational school in the U.S. (and also some abroad) are considered eligible institutions. The institution is eligible if it participates in federal student aid programs. It’s best to contact your school directly to just double check that they qualify, but you can also refer to this list of eligible schools from the U.S. Department of Education.
Unfortunately, yes. The earnings portion of funds withdrawn for non-qualified purposes are typically subject to federal income tax, as well as, an additional 10% federal penalty tax. Taxable withdrawals, on the other hand, are subject to applicable federal income tax on earnings, if any, but are not subject to the 10% additional federal penalty tax on earnings.
A non-qualified withdrawal is any withdrawal that is not considered a qualified expense, a taxable withdrawal, or a rollover. Save for these exceptions, the earnings portion (not the amount you contributed) of a non-qualified withdrawal typically is subject to federal income tax, and an additional 10% federal penalty tax.
There are certain circumstances, such as if your beneficiary receives a full ride scholarship, when you can make a taxable withdrawal. A taxable withdrawal is a withdrawal made due to either the permanent disability or death of a beneficiary, the beneficiary’s receipt of a scholarship, or the beneficiary’s attendance at a military academy. Taxable withdrawals are subject to applicable federal income tax on earnings, if any, but are not subject to the 10% additional federal penalty tax on earnings.
You can make contributions at any time while your account is active, but, in order to reap any tax benefits on certain contributions, they should be made by the time you file your taxes or Tax Day (whichever comes first).
There isn’t a maximum above and beyond the account maximum of $400,000. Once the account reaches its $400,000 maximum, it can continue to earn money, but no additional money can be contributed to the account until the balance dips below $400,000 again. Note that if you choose to contribute more than $15,000 every year, there may be gift tax implications. Also, if you wish to help distribute your tax deduction potential, you may elect to carry forward an Oregon tax deduction on contributions made in the previous tax year. It’s best to consult your tax advisor for more information.