Susan E. Thomas CPA
My child is the beneficiary of a 529 plan. Can we use the 529 funds for her private elementary or secondary school?


No, 529 funds can't be used to pay for an elementary or secondary school education. They can be used only for higher education expenses (college, graduate, or vocational school expenses). But have you considered a Coverdell education savings account? You may be able to contribute as much as $2,000 per year to a Coverdell ESA. You can withdraw money tax free from a Coverdell ESA to pay for qualifying educational expenses at elementary and secondary schools. Qualified expenses include the cost of tuition, room and board, uniforms, transportation, computer equipment, and more. Withdrawals for nonqualified expenses will generally be subject to income tax and an additional 10 percent federal penalty tax on earnings.

And you don't have to choose between a 529 plan and a Coverdell ESA. You can contribute money to both in the same year without penalty.

Prepared by Broadridge Investor Communication Solutions, Inc, Copyright 2011