529 Disbursement when on Full Scholarship

woodsmom
Wed, 27 Feb 2019 19:21:06 +0000

We have a small 529 account that we’ve used for a computer but nothing else during my D’s undergraduate years because she has been on a full tuition plus room and board equivalent scholarship (plus a few small additional outside scholarships). It looks like she is going on to pursue a PhD program, and since it is in engineering it is also fully funded for tuition and some kind of fellowship to cover room and board and living expenses. Since the fellowship to cover living expenses is fully taxable, can we use the 529 to cover a few months of rent without having to pay any taxes on the gains? If so, is there any reason we should do it now in her last semester of undergrad or if we should do it during her first semester of grad school? I am not expecting any future grandchildren, and I’d really like to get the account closed out for simplicity.