I don’t think transportation is covered under a 529. I’ve always been surprised that room and board it, as it is not a QEE for other tax purposes.
Madison, why is there no net income if she charges room and board? If she rented a room to Sally Student and collected room and board of $10k per year, the amount that exceeds expenses would be income. Just because she’s charging it to her own child, why wouldn’t it be the same? She’s calling it an arm’s length transaction (actually charging rent) to claim the 529 money, why wouldn’t it in return be income?