529 guidelines for room & board withdrawals?

6lambs
Wed, 25 May 2011 14:20:36 +0000

@MomCat2 - thanks for the input. Regarding my original question as to whether or not we can withdraw the total QHEE amount from the 529 plan without paying the distribution tax, it appears that we can as I found the answer after digging around in our 529 plan’s disclosure statement:

“Receipt of Scholarship. If your Beneficiary receives a qualified scholarship, Account assets up to the amount of the scholarship may be returned to you without imposition of the Distribution Tax. A qualified scholarship includes certain educational assistance allowances under federal law as well as certain payments for educational expenses (or attributable to attendance at certain educational institutions) that are exempt from federal income tax. The earnings portion of a distribution due to a qualified scholarship is subject to federal and any applicable state income tax at the distributee’s tax rate.”

On a separate note, there does appear to be a discrepancy between our (most?) 529 plan and Pub 970 in that the disclosure statement on our 529 plan says that “certain room & board expenses for students enrolled more than half time” are QHEEs whereas Pub 970 places these costs in the non-QHEE category. How does one rectify which stance takes priority over the other?