The Ultimate Guide to Using 529 Funds—without Breaking the Rules

Life is full of the do’s and don’ts. From the time we’re born — don’t touch this, or do eat your vegetables. And when we get older, those do’s and don’ts become a little more complicated. Do save money for college, don’t invest all your money in one place, do start financial planning early, don’t wait too long for retirement. It’s a lot to keep straight.

If you’re thinking about opening an NC 529 Account to save for your child’s college or K–12 education, it probably comes as no surprise there are do’s and don’ts for that too. Don’t fret, we’ve put together the ultimate guide to using 529 funds, so you can confidently “do” all the “do’s” when the time comes.

How NC 529 Funds Can Be Used

Good news! The NC 529 Account can be used for a host of different school and education-related expenses. We have a full list, which includes just about anything that’s necessary for education. Think about things like books and tuition for college, tuition for K-12 education, career/technical education (CTE) programs, and even a computer.

In this day and age, these are all essential for learning and are referred to as “qualified education expenses.” While buying a computer is on the list of the “do’s” for using 529 funds, gaming software and accessories that aren’t used for educational purposes are on the list of “don’ts.”

How to Make Withdrawals

When it’s time to pay for those college books, tuition, or even that computer, more than likely, the largest expenses for using 529 funds will be college tuition or room and board. This means it’s time to make a withdrawal.

Log in to your child’s NC 529 Account on our website. Check the balance and then request a withdrawal. Here are the steps:

    >Click on the green “View Your Accounts” button and sign in.

    >Select the account number for the appropriate beneficiary.

    >Click on the green “Withdrawals” button at the bottom of the page.

You can also complete a request for withdrawal form and fax, email, or mail it to the NC 529 Plan at P.O. Box 40877, Raleigh, NC 27629-0877.

Using NC 529 Funds for Tuition

As we mentioned above, tuition will be one of the largest costs if you’re using NC 529 Account funds for college, especially as the average price of tuition for a public, in-state four-year college is about $10,000 a year. You are more than welcome to make a withdrawal request for tuition from the NC 529 Account into your bank account. Then, from your bank or brokerage account, you can pay the school.

An easier option may be to pay the school directly. This makes it easier to keep your records straight and takes a step off your plate. First, make sure you know the school payment deadlines so you can schedule the payments and leave time for them to be sent and processed. You can do this by adding the school’s information on the NC 529 withdrawal form.

Do make sure you send the request every year at the same time, that way, you don’t have to worry about any tax penalties or late fund transfers. Remember, it takes three business days for an electronic funds transfer to go through.

Know How You Can’t Use NC 529 Funds

Okay, we’ve gone through the “do’s” on using 529 funds, so let’s go over a few more “don’ts.”

• Don’t go over the max contribution per account ($540,000 per beneficiary, and up to $17,000 per recipient in a year, or $34,000 for a married couple giving jointly).
• Don’t use NC 529 Account funds for things like student traveling costs (even those going to school), parking costs, insurance, or fitness expenses.
• Don’t withdraw more than $10,000 a year per beneficiary for K–12 education.
• Don’t use 529 funds for standardized testing prep courses (like the SAT).

An NC 529 Account is a great way to save and pay for those necessary college expenses everyone faces. Enroll in an NC 529 Account and start saving for K–12 or college today, or learn more about the tax advantages of having an NC 529 Account.