Latest / The College Savings Podcast with Fexingo: 529 Plans, Education Funding, and Student Costs / How 529 Plans Cover Your Child's Robotics Competition Team
Transcript
- Lucas: Let me start with a number: in 2025, over 700,000 students in the United States participated in the FIRST Robotics Competition alone. That is not counting VEX, Botball, or the dozens of other leagues. Luna: And every single one of those teams costs money. Registration, parts, travel — it adds up fast. Lucas: Exactly. A typical FIRST Robotics team spends around $50,000 per season. Some of that comes from sponsors, but families often pay for travel, uniforms, and extra components out of pocket. Here's the angle I want to drill into today: a 529 plan can cover a lot of those costs. Luna: Wait, I thought 529 plans were for tuition, room and board, that kind of thing. How does a robot arm qualify? Lucas: It's about the underlying IRS rule. Section 529 of the Internal Revenue Code defines a qualified expense as any cost that is 'incurred by a designated beneficiary in connection with enrollment or attendance at an eligible educational institution.' But the key is that the IRS also allows expenses for 'educational enrichment' that is not necessarily tied to a specific college. Luna: So robotics competition qualifies as educational enrichment? That seems like a stretch. Lucas: It depends on how the competition is structured. In 2024, the Secure 2.0 Act clarified that 'qualified expenses' include fees for 'certain nonprofit educational programs' that are 'designed to develop academic or career skills.' The FIRST Robotics Competition is explicitly recognized as a program that meets that standard. Luna: Which means parents can use 529 money to pay for registration fees, robot parts, tools — what else? Lucas: Let's break it into categories. First, team registration: your child's portion — if the team is structured so each student pays a fee — that is a qualified expense. Second, supplies and equipment: motors, sensors, controllers, batteries, wiring, structural components. Third: travel to competitions. That includes airfare, hotel, meals, and ground transportation for the student. Luna: What about a laptop that the student uses for programming the robot? That's a big-ticket item. Lucas: That is a gray area but likely qualified if it is required for the competition and not used for general family purposes. The IRS says expenses must be 'primarily for the benefit of the beneficiary.' If the team requires each student to have a laptop for coding and design, and you can document that, you're on solid ground. Luna: So documentation is the key. What do I need to keep? Lucas: Receipts, competition registration confirmations, team handbooks that list required equipment, a copy of the competition's educational mission statement — FIRST publishes one. If you ever get audited, you want to show a clear line from the expense to the educational activity. A cancelled check that just says 'robot parts' is weak. Luna: It sounds like the structure matters. If the team is a for-profit company running a competition, it might not qualify? Lucas: That's right. The expense has to be for a program that is 'educational in nature' and run by a nonprofit or a recognized educational institution. FIRST is a 501 nonprofit. VEX Robotics is run by the Robotics Education and Competition Foundation, also a nonprofit. Those are safe. A for-profit coding camp? Maybe not. Luna: So parents should check the team's sponsoring organization before assuming it's covered. Lucas: Absolutely. And they should also remember that 529 funds can only be used for the student's own expenses. They cannot pay for a team's general operating costs — like renting a build space or buying a shared 3D printer — unless the student's portion is itemized. Luna: Okay, but let's get practical. A family has a 529 plan with $20,000 saved. Their child joins FIRST Robotics. How much can they actually withdraw in a season? Lucas: It depends on the team's structure and the student's direct costs. In many teams, the student pays a participation fee of $500 to $2,000. Plus travel — a regional competition might cost $1,500 per student for airfare and hotel. Robot parts assigned to the student? Another $1,000 to $3,000. So a typical season could run $3,000 to $6,500 per student. Luna: That is a meaningful chunk. And if the student does robotics for four years of high school, that's up to $26,000 — basically a year of in-state tuition at many public universities. Lucas: Which is exactly why this matters. Families who treat robotics as a multi-year commitment can use 529 funds to cover a real portion of the cost, and those funds grow tax-free in the meantime. And if the child later gets a scholarship for robotics? The 529 can be withdrawn penalty-free up to the scholarship amount. Luna: But what if the child doesn't go to college at all? Robotics is often a STEM pipeline, but not everyone follows that path. Lucas: Under Secure 2.0, unused 529 funds can be rolled over into a Roth IRA for the beneficiary — up to $35,000 over a lifetime, subject to annual contribution limits. So if your child does robotics for four years, uses $25,000 from the 529, and then decides not to pursue further education, the remaining balance can seed their retirement. Luna: That's a nice safety net. But let's go back to the documentation piece — because I think that's where parents get tripped up. Lucas: The IRS does not require pre-approval for 529 withdrawals. You just claim the expense on your tax return if audited. The best practice is to maintain a folder — digital or physical — with receipts, a copy of the competition's educational mission, and a note explaining how each expense relates to the student's participation. Luna: And the withdrawal should be made in the same tax year as the expense, right? Lucas: Yes. You cannot pay for a competition in March 2026 with a withdrawal made in January 2027 — the IRS expects a reasonable proximity. Also, the withdrawal should be made to the account owner, and then the parent pays the expense. That maintains a clear paper trail. Luna: What about tools — like a soldering iron or a multimeter? Those are used for the robot but also could be used for other projects. Lucas: This is a classic 'dual-use' item. The IRS says that if the item is 'primarily for educational purposes,' it's qualified. A soldering iron that stays in the team's build space and is used exclusively for the robot? Likely qualified. A multimeter that the student uses at home for hobby electronics? Gray area. I would suggest parents buy those items separately and not use 529 funds for them unless they can clearly demonstrate educational necessity. Luna: So the safer play is to stick with expenses that are clearly tied to the competition — registration, travel, team-specific supplies. Lucas: Exactly. And there is one more category that I think is underutilized: competition-related software. Many teams use CAD software like SolidWorks or Fusion 360, which can cost several hundred dollars per student. If the team requires a student license, that is a qualified expense. Luna: And what about team uniforms — t-shirts, jackets, that sort of thing? Lucas: Uniforms are qualified if they are required for participation. Many competitions require team members to wear matching shirts or safety gear. As long as the uniform is not something the student would wear in daily life, it counts. Luna: This is actually a really practical episode. I think a lot of parents don't realize how flexible 529 plans have become. Lucas: And look — the show itself is possible because listeners like you support it. A small group of folks chip in monthly through buy me a coffee dot com slash fexingo, and that literally funds us making episodes like this, digging into specific rules and use cases. Luna: Yeah, it's a listener-funded show — no ads, no sponsors. If you've gotten value from these episodes, that's where you can help keep it going. No pressure, just a quick mention. Lucas: Exactly. So back to robotics — one thing I want to emphasize: this is not a loophole. The IRS explicitly allows these expenses. But you have to be deliberate. Keep records, stay within the guidelines, and you can turn your 529 into a powerful tool for STEM enrichment. Luna: And if your child's team is not a nonprofit? You can still pay for the student's portion out of pocket and then reimburse yourself from the 529 if the expense is documented properly. Lucas: Right. The key is always: is the activity educational? Is it run by a recognized organization? Is the expense directly for the student? If all three answers are yes, you're in good shape. Luna: I have a final question — what about the child's time? Can you use 529 money to pay for coaching or mentoring? Lucas: If the coach is a third-party vendor providing specialized instruction — like a robotics camp or a private mentor — and the student is enrolled in a program, that can be qualified. But if it's just a parent volunteering as a coach, you can't pay yourself with 529 funds. That's a personal service. Luna: That makes sense. So the takeaway here: robotics competition costs can be a qualified 529 expense, but only if you're careful about the structure and documentation. Lucas: Exactly. And with the growing popularity of STEM programs, this is a use case more families should know about. It's not just about college tuition anymore — 529 plans are becoming flexible education savings accounts.