Latest / The College Savings Podcast with Fexingo: 529 Plans, Education Funding, and Student Costs / Using 529 Plans for Your Childs Cooking School Tuition
Transcript
- Lucas: Luna, when you hear 'culinary school,' do you think of a kid chopping onions in a basement kitchen or a serious two-year degree program that costs as much as a liberal arts college? Luna: Honestly, I've always pictured something like Le Cordon Bleu — famous brand, but no idea if it's actually a 'college' in the financial aid sense. Lucas: Right, and that's exactly the confusion. A lot of parents assume a 529 plan is only for traditional four-year universities, but the IRS definition of a qualified institution is broader. The school just has to be eligible to participate in federal student aid programs under Title IV of the Higher Education Act. Luna: So that means the Culinary Institute of America, the Institute of Culinary Education, Johnson & Wales — those all qualify? Lucas: Yes, as long as they're accredited and their students can receive federal loans or Pell Grants. The CIA in Hyde Park, for example, is a degree-granting institution, fully Title IV eligible. So tuition, fees, and even room and board — if the student is enrolled at least half-time — are all qualified expenses. Luna: What about a shorter certificate program, like a six-month pastry arts diploma? Does that still count? Lucas: It does, but with a catch. The program needs to be offered by an eligible institution, and the student must be enrolled at least half-time. Many culinary certificate programs are full-time by design, so that's usually fine. But if it's a weekend hobby course at a local cooking school that's not Title IV eligible, no dice. Luna: So a parent can't use 529 funds to pay for a Saturday soufflé class at Sur La Table. Lucas: Exactly. Sur La Table is not an eligible educational institution. But if your kid enrolls in a professional baking program at a community college that offers financial aid, that works. And here's a nuance: equipment. If the school requires specific knives, chef's uniforms, or a set of kitchen tools as a condition of enrollment, those can be paid from the 529. Luna: That's a big one. I remember seeing culinary school supply lists that run over a thousand dollars for knives and pots. Lucas: Right. The IRS says 'fees, books, supplies, and equipment required for enrollment or attendance.' A chef's knife set is equipment. So it's a qualified expense. But here's where people slip up: you can't use 529 money for a personal laptop unless the school explicitly requires it. Same logic applies — if the syllabus says 'bring a 10-inch chef's knife,' you're good. If you just want a better knife for home, that's a personal expense. Luna: Makes sense. And what about the externship that many culinary programs require? Some are paid, some are unpaid, but the student might have to relocate temporarily. Lucas: The externship itself is part of the curriculum, so tuition and fees related to it are covered. But travel costs, rent for a short-term apartment, and food — unless the student is enrolled at least half-time and the school treats that as room and board — those are not qualified. It gets tricky. The safe move is to keep receipts and talk to a tax advisor. Luna: Alright, let's talk numbers. If a parent wants to save for a culinary degree starting today, what's the strategy? Lucas: The annual gift tax exclusion for 2026 is eighteen thousand dollars per donor per beneficiary. So a couple could contribute thirty-six thousand tax-free each year. But the real trick — and I think this is worth mentioning — is the five-year election. You can front-load up to five years of contributions in a single year. Luna: Meaning a couple could put in one hundred eighty thousand dollars in one shot? Lucas: Correct. As long as they file IRS Form 709 and treat it as spreading over five years. That's powerful for culinary school because the total cost of a degree at the CIA — tuition, fees, room and board — can run around sixty thousand a year. So front-loading lets you capture more growth time in the account. Luna: And if the child decides not to go to culinary school? They pivot to a traditional college, or maybe don't go at all. What then? Lucas: Then you have options. Change the beneficiary to another family member — a sibling, a cousin, even yourself if you want to take a cooking class at an eligible institution. Or you can withdraw the money, but the earnings get hit with income tax plus a ten percent penalty. Unless the child gets a scholarship, in which case you can withdraw penalty-free up to the scholarship amount. Luna: So the penalty is not a death sentence, but it stings. Better to have a backup plan. Lucas: Exactly. And one more thing: some states offer a state income tax deduction for 529 contributions. If you live in a state like New York or Illinois, that deduction can save you a few hundred dollars a year. But the deduction is often capped, so check your state's rules. Luna: Alright, one more nuance. What about an online culinary program? Post-pandemic, there are a lot of hybrid or fully remote diplomas. Lucas: As long as the institution is Title IV eligible and the student is enrolled at least half-time, online works. But the room and board expense only applies if the student is on campus. So if they're learning from home, you can't use 529 funds for their rent or groceries. Luna: Good to know. So the key takeaway: check the school's federal school code on the FAFSA website. If they have one, you're likely in the clear for tuition and required supplies. Lucas: Perfect summary. And if you're a parent listening, don't assume culinary school is out of reach for a 529. It's a legitimate path, and the tax advantages are real. Luna: Absolutely. And you know, we've been doing these episodes without any ads for a while now. We keep it that way on purpose — listener support is what makes that possible. Lucas: Yeah. If you find these money conversations useful, you can help us stay independent at buy me a coffee dot com slash fexingo. It's a low-key way to keep the show ad-free. Luna: Exactly. No pressure, just if it's valuable to you. Back to the topic — one last thing I want to touch on: the timing of contributions. Lucas: Good point. If your child is already in high school and interested in culinary arts, it's not too late. You can still open a 529 and get a few years of tax-free growth. But the earlier you start, the more time compounding works in your favor. Luna: Even two years of growth on a lump sum can make a difference. And with the five-year election, you can get a lot in the account quickly. Lucas: Right. So if your kid's dream is to become a chef, your 529 can be the secret ingredient. Just make sure the school is eligible, keep receipts for equipment, and don't forget the gift tax rules. Luna: Perfect. That's a wrap for episode 71. Next time, we'll look at another unconventional qualified expense.