From Bob Jennings at TaxSpeaker. Check out TaxSpeaker at taxspeaker.com 529 plan distributions used to pay for nonqualified expenses are subject to income tax and a 10% penalty on the earnings portion of the withdrawal. This includes 529 distributions for airfare and other travel costs, college application or testing fees, health insurance, or room and board costs beyond the college’s cost of attendance (COA) allowance. If the student’s parent qualifies for the AOTC or LLTC