A 529 Plan is an education savings plan that many people use to fund the higher education costs for their kids. The plan has very specific approved expenditures, and a new one has been added - computer technology.

529 plans have long been popular with parents. This is due to the fact they provide tax-free earnings for the benefit of higher education. Much like an IRA, parents can contribute to the funds and what the gains grow tax fee over the years until their child is ready for higher education. Higher education includes college, vocational schools and graduate school.

One of the few criticism directed at the 529 plan was the limited expenditures it could be used for. The fees included the basics like tuition, room and board, supplies and books. In this digital world, it was rather odd that computers were not considered an accepted expenditure. This is particularly true since many teachers at levels as low as high school and elementary school now post homework assignments and the like online. Going to college without a computer seems practically prehistoric! This oddity has now been changed.

The American Recovery and Reinvestment Act of 2009 includes a provision adding computer technology to the list of acceptable 529 plan expenditures. In fact, the provision is fairly broad. It now includes the cost of buying a computer, internet access and related services. The downside is the provision is only good for 2009 and 2010, although it is hard to imagine it not eventually becoming a permanent part of the accepted 529 plan expenditures list.

The American Recovery and Reinvestment Act of 2009, better known as the Stimulus Bill, has been criticized in many different ways. The addition of computer technology to the expenditures of the 529 Plan is not an area anyone can reasonably disagree with.

Thomas Ajava is with FrederickTaxAttorney.com - your online resource for finding a Frederick tax attorney to help with tax planning and problems.