Scholarship Stipend and 529 Plan

BelknapPoint
Wed, 30 Aug 2017 15:12:27 +0000

I don’t think room and board are qualified educational expenses.

Room and board are indeed qualified expenses - per IRS
(not sure if links work here but search irs site for 529 plans - its explicitly mentioned in FAQ that room and board are qualified expenses)

This can be confusing because there are different definitions of QEE depending on what tax program you are talking about. Room and board is QEE (for half-time or more students) for 529 payments, but room and board is not QEE for anything else: tax credits, determining tax status of grants and scholarships, tuition and fees deduction.

I’m just not sure how submitting expense receipts goes for the 529 plan.

There is no requirement to submit receipts when paying expenses with 529 funds. You figure out how you want to allocate the dollars from your different funding sources, and then you or the student pays any required income taxes according to the IRS rules. One of the key things to remember here is that if 529 money is used for non-QEE, only the earnings portion of the 529 distribution will be taxable. If grants and scholarships are used for non-QEE, the full amount is taxable.