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Pay for On-Campus housing, live at home (Fall 2020) - Use 529 plan dollars?

TdoesCollegeTdoesCollege 180 replies1 threads Junior Member
For the Fall 2020 quarter, my third year DC is committed (by lease) to a room in an on-campus, privately run flat. The lease dates were changed from June 2020-June 2021 to Sept 2020-Sept 2021 as an option from the leasing company in May. All of their classes are virtual/remote. At this time, we're considering having DC reside at home for Fall quarter, but continue to pay "rent" to hold his room in the flat for Winter and/or Spring. We are not being offered the option to cancel the lease, short of finding a sublet tenant (HAH!). We're on the hook for the entire year's rent.

That being said, does anyone have any suggestions as to where definitive guidelines to help determine if 529 plan dollars can be used to pay for this arrangement might be found? Or, could we use some 529 dollars, based on institutional COA for living at home, to help defray the on-campus flat cost? (similar to what was suggested in https://talk.collegeconfidential.com/financial-aid-scholarships/2193490-can-529-be-used-to-pay-rent-utilities-on-an-office-workspace.html#latest)

Based on another 529 thread, can anyone offer search suggestions for definitive guidelines regarding the tax implications of "charging rent" vs using the institutional COA for 529 withdrawals without "charging rent"?

Thanks for any suggestions or direction.
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Replies to: Pay for On-Campus housing, live at home (Fall 2020) - Use 529 plan dollars?

  • BelknapPointBelknapPoint 5020 replies20 threads Senior Member
    My responses in the thread you linked to apply here. The easiest, cleanest way to do this would be to not charge your child rent for living at home, and take a qualified 529 distribution up to the maximum amount based on the school's published room and board COA for the student's actual living arrangement.

    "Definitive" guidelines on certain aspects of using 529 money are hard to come by. If you haven't already, check out IRS Pub 970, Chapter 8 for the basics on 529 accounts and use.

    https://www.irs.gov/pub/irs-pdf/p970.pdf
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  • Twoin18Twoin18 2259 replies21 threads Senior Member
    As an extension to this question, when the the school's published room and board COA is given for an academic year of ~9 months, should the available amount for distribution from the 529 be pro rata to the 9 month school year or a 12 month calendar year? What if you have a 12 month apartment lease? Does it make a difference if your kid was taking classes or not (ie what about summer vacation)?

    As an example, if my kid came home from college in March and stayed for 5 months until August (say 2 months of the academic year and 3 months of the summer), is the right amount 2/9th of the published COA or 5/12th or some other amount?

    And more generally, if you have a 12 month lease at $1000 per month but don’t take summer classes, if the published COA is more than $12000 then is the allowable amount $9000 (9 months from Aug 15 to May 15) or $10000 (rent paid each month from Aug through May) or $12000 (full year)?
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  • TdoesCollegeTdoesCollege 180 replies1 threads Junior Member
    @Twoin18 Good answers/questions: similar situation here, DC came home for spring quarter, then did two sessions of summer classes. (Lease hadn’t started, we were never billed for spring quarter housing/board.). So, do I use 1/3 COA for spring quarter (COA is for three quarters?) and 1/3 COA for summer sessions? I plan to ask Uni for official summer COA used for student living at home.
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  • BelknapPointBelknapPoint 5020 replies20 threads Senior Member
    edited September 11
    As an extension to this question, when the the school's published room and board COA is given for an academic year of ~9 months, should the available amount for distribution from the 529 be pro rata to the 9 month school year or a 12 month calendar year? What if you have a 12 month apartment lease? Does it make a difference if your kid was taking classes or not (ie what about summer vacation)?

    As an example, if my kid came home from college in March and stayed for 5 months until August (say 2 months of the academic year and 3 months of the summer), is the right amount 2/9th of the published COA or 5/12th or some other amount?

    The COA is for whatever academic period is specified. If the school's published board amount for a "traditional" academic year (two semesters, no classes in summer) for a student living off-campus is, say, $6,000, then $6,000 in qualified funds can be taken from a 529 account to pay for those expenses. If the school offers summer classes, hopefully the school has COA figures specifically for those classes. If the school breaks the academic year into trimesters or quarters but only publishes COA as a full year amount, divide a full academic year COA by three or four to come up with the figures to use for a student who doesn't attend one or more trimester or quarter. Any room and board expenses incurred when the student is not at least a half-time student, under the school's definition of that term, are not considered qualified expenses for 529 purposes.

    And more generally, if you have a 12 month lease at $1000 per month but don’t take summer classes, if the published COA is more than $12000 then is the allowable amount $9000 (9 months from Aug 15 to May 15) or $10000 (rent paid each month from Aug through May) or $12000 (full year)?

    The maximum 529 qualified amount for room and board is the greater of:

    a) The room and board portion of the COA for the particular academic period and living arrangement of the student;

    OR

    b) The actual amount charged if the student is residing in housing owned or operated by the school.

    In your example, if the school's published COA for off-campus room and board for a "traditional" academic year (two semesters) is $14,000, then you can take a qualified distribution of $14,000 from a 529 account to pay for off-campus room and board expenses incurred from the beginning of the fall semester to the end of the spring semester (again, this is for a "traditional" academic year). I realize that many students are on non-traditional plans. Don't overthink this stuff -- use common sense.
    edited September 11
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