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Using 529 funds for off-campus living expenses

PsiPsi Posts: 255Registered User Junior Member
I would be interested in hearing from parents who use funds from 529 accounts to pay for off-campus housing costs.

Our 529 plan states that "the limit for off-campus housing is the allowance included in the COA at the [university], or if greater, the actual amount charged by the [university] for room and board costs."

On University X's website, estimates for off-campus room and board are listed as $6400. Does this mean that the amount that one may withdraw from a 529 for rent, food, etc. for a student living off-campus at Univ X should not exceed $6400?

If 529 funds are used to pay for off-campus living expenses, what type of documentation needs to be maintained for these expenses?
Post edited by Psi on

Replies to: Using 529 funds for off-campus living expenses

  • cptofthehousecptofthehouse Posts: 24,796Registered User Senior Member
    You need to talk to someone who is administering the 529 for specifics on how that should be done. One way is to draw the COA amount and pay it to the university. That way you will have a withdrawal that exactly matches that COA figure. Then the university can issue you a check for the excess. We have done that with loans and other things.
  • vballmomvballmom Posts: 3,132Super Moderator Senior Member
    Room and board (paid directly to other landlord and grocery store) are considered qualified higher education expenses to the extent allowed by the budget amount set by school. So if the school's housing budget is $6400 for off-campus room and board, you can't withdraw more than that amount from the 529 and still have it be a tax- and penalty-free distribution.

    My son will be living off campus next fall. He'll pay his portion of the rent to his landlord, and so I'm just going to use the lease to document his monthly payments. I'll withdraw a few months' worth at a time and transfer that to his checking account so he can pay it every month.

    My son is currently living in an on-campus apartment with some number of meals already paid for on his meal plan. For other groceries, my son is currently using a credit card I got for him on an account that I have. He also pays cash from his own savings. Every time he goes to the grocery (only once a week or so) he enters the amount into a spreadsheet we have on Google docs that he's shared with me. At the end of the year I'll reimburse him for the total amount spent (it's not a lot). Next fall I'll probably do the withdrawal from the 529 ahead of time more or less per his budget, rather than wait until the end of the school year.

    Money withdrawn from a 529 is reported by calendar year, not school year, so some of the food money from last year will come from his UGMA rather than the 529. I'll do it a little differently for 2010-2011 since it will be quite a bit more $$s, and have it all come from his 529 for that school year.
  • vballmomvballmom Posts: 3,132Super Moderator Senior Member
    Room and board (paid directly to other landlord and grocery store) are considered qualified higher education expenses to the extent allowed by the budget amount set by school. So if the school's housing budget is $6400 for off-campus room and board, you can't withdraw more than that amount from the 529 and still have it be a tax- and penalty-free distribution.

    My son will be living off campus next fall. He'll pay his portion of the rent to his landlord, and so I'm just going to use the lease to document his monthly payments. I'll withdraw a few months' worth at a time and transfer that to his checking account so he can pay it every month.

    My son is currently living in an on-campus apartment with some number of meals already paid for on his meal plan. For other groceries, my son is currently using a credit card I got for him on an account that I have. He also pays cash from his own savings. Every time he goes to the grocery (only once a week or so) he enters the amount into a spreadsheet we have on Google docs that he's shared with me. At the end of the year I'll reimburse him for the total amount spent (it's not a lot). Next fall I'll probably do the withdrawal from the 529 ahead of time more or less per his budget, rather than wait until the end of the school year.

    Money withdrawn from a 529 is reported by calendar year, not school year, so some of the food money from last year will come from his UGMA rather than the 529. I'll do it a little differently for 2010-2011 since it will be quite a bit more $$s, and have it all come from his 529 for that school year.
  • Princess'DadPrincess'Dad Posts: 1,123Registered User Senior Member
    I am bumping this.

    Supermom is correct. However, you will be "audited" by the IRA. The school sends out a statement of costs which is tuition and on-campus housing and sometimes mealplans. This goes to the IRA. If you withdraw more than this, they will send you a penalty and tax due notice which you have to respond to. You will "win", but it is a hassle
  • 4kidsdad4kidsdad Posts: 2,943Registered User Senior Member
    The school sends out a statement of costs which is tuition and on-campus housing and sometimes mealplans. This goes to the IRA.
    I'm not aware that schools are sending the COA to IRS. Also, how does IRS know which school your kids are attending?
  • dodgersmomdodgersmom Posts: 5,960Registered User Senior Member
    The IRA? Really?

    Wasn't aware that the Irish Republican Army had any interest in U.S. student savings accounts. Live and learn . . .
  • Madison85Madison85 Posts: 2,198Registered User Senior Member
    Don't take tax advice from someone who refers to the Internal Revenue Service as the 'IRA'.
  • romanigypsyeyesromanigypsyeyes Posts: 22,864Registered User Senior Member
    Or someone who bumps a 3 year old thread.... when this topic comes up all the time lol
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