529 funds for teacher certification test?

[pirsquared]

DD21 is taking one of her teacher certification tests today and she asked if we can use 529 funds for the test fee. I googled and found an article form last March indicating that legislation had been introduced to allow this.

https://www.napa-net.org/news-info/...allow-529-savings-professional-certifications

However, I can't find anything that tells whether this passed. FWIW, her degree will be in secondary education, but the tests are not required for graduation. However, they are required for teacher certification. Does anyone have more info on this?

Thanks!

 

[SecondCor521]

The bill was introduced in the House and then referred to a committee back in March:

https://www.congress.gov/bill/117th-congress/house-bill/2171/actions?r=92&s=1

There are a lot of bills that are in this state and the vast majority of them AFAIK do not become law.

So at this point it appears not to be a qualified expense.

You could always make a 529 withdrawal and treat it as a non-qualified expense. If you did so, the portion of the withdrawal that was gains would be subject to ordinary income taxes and a 10% penalty. The 10% penalty can be excused if your daughter has unused tax-free scholarships in excess of the testing fee - see Form 5329 instructions for more details on this.

Or you or she could just pay the fee out of pocket of course.

Good luck to your daughter. My youngest is a sophomore working toward a degree in music education so will be taking those same tests in about two years.

 

[JRon]

It’s been a while since we had 529 plans for our children, but at that time the educational aspect of what you could use 529 funds for was very broad. I would be surprised if you could not use it for certification costs. Obviously that doesn’t answer your specific question, but I would proceed if it were me.

 

[OldShooter]

I would do it. What is the likelihood that your 529 transactions will get audited? Probably zero. IF the man asks, you are just a naïve taxpayer and it seemed to you that this was an educational expense. Guaranteed he will not put you in jail.

 

[SecondCor521]

It’s been a while since we had 529 plans for our children, but at that time the educational aspect of what you could use 529 funds for was very broad. I would be surprised if you could not use it for certification costs. Obviously that doesn’t answer your specific question, but I would proceed if it were me.

You can use 529 distributions for certification tests (or anything, really). But in order for the distribution to be qualified, it has to be for an expense that is listed in Pub 970 Chapter 8. (https://www.irs.gov/pub/irs-pdf/p970.pdf pp. 59-60)

What 529s can be used for has expanded over the years and will continue to be expanded further, but there are still things that are excluded, including, I think, the kind of fee that OP is talking about.

Could they withdraw and use the money for the fee and claim it was qualified? Yep. Would that be tax fraud? I think so. Would they get caught? Probably not.

 

[pirsquared]

I realize that we could almost certainly get away with doing this, but we will not do it unless we are certain it is allowed. It is important to us to follow tax rules to the best of our ability. So DD will just pay out of pocket or we will make a non-qualified withdrawal. We will be making a penalty-free non-qualified withdrawal at some point anyway due to her scholarships.

Thanks for the feedback!