Can 529 fund graduate school?

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Dear Dr. Don,
Can 529 account money be used to pay for graduate or professional school tuition and related expenses, or only for undergraduate expenses?

Also, if I have extra money in one of my kid’s 529 accounts, can I use the money from that account to pay for expenses related to one of my other children with an account that has been completely depleted?
— Mike Mixer

Dear Mike,
The 529 account monies can be used to pay for graduate or professional school tuition and other qualified higher education expenses, including fees, books, supplies and equipment, as long as the student attends an eligible educational institution. Room and board can also count, but only for those enrolled at least half-time in a degree program.

Graduate schools typically fit the definition of an eligible education institution, as do many professional schools both domestic and foreign. The litmus test for determining if a school is an eligible educational institution is to find out if the Department of Education has a “school code” listed for it.

If you have extra money in one child’s account, you can change the account beneficiary to the child needing the funds. From IRS Form 970, “Tax Benefits for Education“: “There are no income tax consequences if the designated beneficiary of an account is changed to a member of the beneficiary’s family.” There also shouldn’t be any gift tax implications in changing the account’s beneficiary between siblings. Check with your tax professional if you have any questions about your situation.

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