529 Funding, Room and Board for Students Living at Home and A Couple of Curve Balls
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The money can only be used for a particular beneficiary, and only for college expenses. These expenses include tuition, education supplies, and room and board. Finally, keep in mind that the room and board must be "in direct support" of the education. Depending on the school, students should make sure the institution is eligible to participate in the federal student aid program, which makes it qualified for 529 assets, Riskin noted. While the Student Accounts Office may be able to provide that information. It is the Financial Aid Office that estimates the cost of attendance .
Families may also be able to use 529 assets for room and board for students living at home. But the cost allowable must be lower than the cost of living on campus. Some colleges may specify a cost for “commuters” or “at home.” Still, the student at home would only be able to use the 529 savings for the lesser amount. Some colleges do not make any distinction in cost between on-campus and living at home. You can usually pay for off-campus living expenses by paying expenses out-of-pocket and reimbursing yourself with funds from the 529 plan.
Education Savings Plan
Since 2015, the purchase of a computer and any related peripheral equipment, computer software, or Internet access and related services are considered 529 qualified expenses. The student must be half time or more, in order for room and board to be considered qualified expenses for a 529 plan distribution. In either case, it’s important to ensure that the room and board fees don’t exceed the projected expenses in the COA for the nine-month academic year.
The actual amount charged if the student is residing in housing owned or operated by the school. Yes, she can use at-home costs as long as they d/n exceed the allowable off-campus costs. I have never been asked this question before, but I would presume that the funds w/b treated as expense sharing rather than income to you. However, if you deduct mortgage interest and RE taxes, I do wonder if the deduction s/b reduced.
Are room and board qualified education expenses?
We also know that, for off-campus students, the expense for room and board qualifies to the extent it isn’t more than the allowance for room and board in the COA for a particular academic period. For families that have mapped out a financial plan for college, they may find they can stay on track and stay on script, despite the changing landscape. The change in venue for their child may mean a different experience for college.
It is also possible to use a 529 plan for off-campus housing, up to a maximum of your school’s cost of attendance. When paying out of your 529 for off-campus housing, you’ll usually need to pay your expenses yourself, and then arrange for reimbursement. However, some plans can make it possible to arrange for a check to be sent directly to your landlord.
Qualified 529 Plan Expenses
A 529 plan is not the only source of funding for college expenses. Families of students studying at home can also rely on federal financial aid and loans. Living at home, or off campus, will be factored in to the overall “cost of attendance” by the college.
If a student is living off-campus because on-campus housing is not available, then the student can claim the higher off-campus costs. However, the student needs to obtain a letter from the school signed by a school official that specifically states that on-campus is not available and it directs that the student must make other housing accommodations. The difference here is the use of “qualified higher education expenses” as a determining factor. This seems to imply that your actual expenses, not the COA, should be used to determine qualified expenses within the COA parameters. Doesn’t apply because the student isn’t living in university owned or operated housing.
Paying for Off-Campus Housing
(The figure is usually listed on the college’s website, or you can ask the financial aid office.) However, the tax law does not specify whether you can withdraw the money for the full year’s rent if he only attends classes nine months out of the year. For room and board expenses to be considered qualified, the student has to be enrolled in an eligible college program on at least a half-time basis. This is further supported by the requirement that off-campus students need to collect evidence of every qualified expense, including bank and credit card statements, and receipts, as proof of qualified expenses.
We should be able to use up the remaining 529 funds over these last 2 years. The less popular 529 prepaid plan allows the account holder to purchase prepaid tuition to be used at a designated institutional partner. Unlike 529 college savings plan, 529 prepaid plans can only be used for tuition and mandatory fees. You can use your 529 for room and board, and this includes meal plans when they are part of your school’s room and board fees.
But other some colleges very much differentiate, setting the cost of attendance for students living with their parents as low as zero, Riskin said. For students who are returning to school in the fall, the refunds can simply go toward expenses then. Many colleges and universities are reimbursing spring-semester fees, and for families that paid those costs with 529 plan assets, there can be tax consequences.
If he does register for summer classes, however, the ambiguity is removed and the full year’s expenses will definitely count, up to the college’s allowance for room and board. Either way, keep canceled checks or other records of the rent paid in your tax files. A tax-advantaged 529 college savings plan can be used to pay for college, but not all expenses qualify. These must be used toward qualified education expenses or else they will incur federal income tax and an additional 10% penalty. You are correct that he doesn’t have to live on-campus to withdraw money tax-free from the 529 for rent. As long as he’s a student at least half-time, you can withdraw the cost of rent for the off-campus apartment up to the room-and-board allowance that the college included in the cost of attendance for federal financial aid purposes.
If they do, any amount over and above the COA will be deemed a non-qualified higher education expense subject to tax and a 10% penalty. Even if the apartment is leased for 12 months, you can only cover up to the estimated cost of off-campus housing in the COA. Yes, 529 funds can be used for room and board, whether you’re living on-campus or off-campus.
Is for commuter students, as opposed to off-campus students, on the school’s website, I would contact the university for that amount. Thus, if the student is living off-campus, the cost of room and board must not exceed the allowance for room and board in the college’s student budget for students living off-campus. A parent cannot use a 529 plan distribution to pay the mortgage on a house or condo in which the student lives, but parents may be able to charge the student rent on this home. Congress recently passed legislation stating that, in this increasingly digital age, it’s important to have a computer for all college education, so 529 plans now cover them. The requirements are that the equipment and software must be primarily used by the beneficiary for educational purposes. In essence, that means things like Word software and medical programs are covered… but the newest Call of Duty video game is not.
Some plans may allow you to send the distribution check directly to the landlord. Therefore, if you use your 529 plan funds to pay for dorm furniture, the disbursements will be subject to federal income tax, and you’ll be hit with a 10% penalty. If the cost of room and board exceeds the student budget’s allowance for room and board, any excess above the allowance will be considered a non-qualified distribution if 529 plan money is used to pay for it.
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