Hi, I am trying to figure out what Study Abroad Room and Board (specifically, “board” as in food) is a qualified expense for 529 plans. Is it just like at home off-campus, where anything for food or housing, as long as it is under what the published dorm+meal plan college costs would be, is considered qualified?
PS My 529 plan gave me a general answer (that it should work like off campus room and board, and directed me to the IRS document 970, but it doesn’t spell it out at all besides this: "Expenses for room and board must be incurred by students who are enrolled at least half-time (defined later).
The expense for room and board qualifies only to the extent that it isn’t more than the greater of the following two amounts.
Chapter 8 Qualified Tuition Program (QTP) Page 59
a. The allowance for room and board, as determined by the school, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.
b. The actual amount charged if the student is residing in housing owned or operated by the school.
So, let me simplify my question. If the costs for my son’s study abroad Room and Board is $5000 for the semester, and the amount for Dorm+Meal plan at home college for the semester is $8000, can I use the balance of $3000 that he spends abroad on food as qualified expenses? Thanks!
Thanks, even if the “board” is only 5 dinners a week, whereas a meal plan at school (which would be more expensive) would cover all food costs?
And I guess the above would be the same question I will have for next semester, at home college, S in an off campus apartment with a minimal meal plan. Can I use 529 funds for additional food costs that higher meal plans would cover? (Because I know that if the student uses NO meal plan off campus, food costs up to the amount of a meal plan are qualified). Thanks.
Ask the school if they have different published COA figures for different student living situations. Some schools put out only one published COA that needs to be used by every student; other schools publish COAs for a variety of student living situation: on campus, apartment off campus and no dining plan, living at home w/parents, etc.
So I called my 529 plan again, because I’m still unclear. This rep said Study Abroad “board” can only be qualified if it is what the school billed, so anything above his included 5/week home stay meals are NOT qualified. And back home, off campus qualified “board” can be groceries, but not restaurant food, as long as it is under the home school meal plan amount.
I am really wondering how these distinctions are made (grocery vs restaurant, abroad vs home), if it isn’t in the actual IRS document (quoted above) which is quite broad. Are people just interpreting the broad definition? How do I find out the real detailed answer? Call the IRS???
I’m very surprised that someone from the 529 plan told you this stuff. What I would expect to hear if I called a 529 plan administrator to ask detailed questions about what are and are not qualified expenses is “we can’t give you tax advice; please ask the IRS or consult with a tax professional.”
Primarily you are limited to the costs INCURRED, and that amount can’t exceed the home college’s allowance/actual cost.
Is there a breakdown showing housing cost vs. 5 meals cost - e.g., are there different meal plans (such as “no” meals). Then I would "unbundle the $5,000, and use the “actual meal expense” up to the home college’s meal plan.
This sounds like an invention by that rep (perhaps to stay absolutely safe so it doesn’t come back to him if someone later gets audited and makes a fuss). As an example of circumstances that doesn’t consider, many universities have a food court with restaurants, coffee shops, and dining dollars included in your meal plan, in some places those dining dollars can be used off-campus (eg GWU). So the rep would be implying that a meal paid with dining dollars is qualified but the same meal paid with cash is not? Or the Starbucks on campus is ok but the one down the street is not? Or if you buy a bagel it makes a difference if you eat it at the store vs take it home as a “grocery” item?
OK @BelknapPoint and @DigitalDad , I’m back with another 529 question! Thanks for your help with the study abroad questions, this is related.
Son is back at school (no longer abroad), off campus with no meal plan so I am trying to figure out how much of his grocery costs are Qualified Expenses. The school has 5 different levels of meal plans. Does it matter which one I choose to figure out the amount that we can’t go over, for actual expenses? The easy thing would be to pick the most expensive plan, but that doesn’t seem right to me.
Many schools have different categories of Cost of Attendance, depending on the student’s particular situation: living on campus in a dorm; living off campus not in school housing (i.e. an apartment); living at home. Does the school provide a COA for your son’s living arrangement?
After year 1 (when they mandated the premium plan), our college had a “default” (one step down from the first-year plan) that they defaulted students to. Students could use the portal to opt for an even lesser plan.
I decided that I was comfortable that using the school’s “default” plan was “defensible”, if it was ever questioned. If your college has an “on campus” vs “off campus” plan, that might be another way to justify which one you picked to match your student’s situation.
I made myself a simple Excel spreadsheet, divided the semester fee into an amount/month - because my daughter wanted to know a monthly budget that she knew she’d be reimbursed for. Even with buying groceries and cooking breakfast and dinner, and the occasional take-out or weekend dining-out, and even bars/liquor store, she actually never fully used up that budget in any month - and that was in Manhattan!
In fact, she used some of the “budget” to sign up for a minimal meal plan that allowed her to grab lunches between classes during some days.
Thanks; it doesn’t look like it. The COA page just lists the different housing option costs and the different meal plans and their costs. I’ll email the Bursar’s office.
@DigitalDad , thanks. His school has a lot of options and no default. They have min required meal plans for students living in on campus/univ. owned apts, but my son is not in one of those. The plans in the middle vary a lot…one is unlimited meal swipes for around $7000 per year, the next one lower is 300 meals per year for $4000. I feel like if Bursar’s office doesn’t give me an exact number I should choose one of these middle ones, that is a big difference though!
And gosh shoot now that I’m thinking about it, can we include any on-campus meals bought at dining halls in the Qualified Expenses? Maybe I am being way too nitpicky at this point.
Well, in sophomore year, my daughter lived in a college-owned apartment off-campus in a building that also had regular tenants. For the last two years, she lived in apartments that were no longer college-owned. Frankly, I failed to see why the nature of the landlord would impact justifiable meal expenses - so I treated all those years the same.
So, I personally would pick the min-required meal plan for students living in univ owned apartments as my “budget”, from that I would sign up for whatever meal plan that makes sense so that the student can swipe meals between classes etc.
The left-over balance would then be available for groceries/off-campus dining etc.
Again, I felt comfortable that I could justify that decision, specially given that I would have receipts to show actual expenses.
(In my mind, it was fully in the spirit of the law, basing it on the figure that the college had published as the number that one needed to sustain themselves while living in their city and pursuing studies at their institution.)
Can they use some that allowance for off campus dining? I’ve been back and forth trying to get that answered but thought it came down to it is only groceries!
The fact that this isn’t spelled out in the detail in the tax document is frustrating to me. And I also feel like I am definitely living in the spirit of the law and probably being a lot more diligent than many.
It literally states “expenses for room and board”. That does not limit it to grocery bills.
So up to the “allowance” determined by the school for meals (e.g., the cost of their meal plan for students not commuting from the family home), any combination of meal-related expenses apply: Any “minimal” meal plan to cover the occasional cafeteria meal on certain days, plus any grocery shopping, but also any dining out.
I even allowed the occasional trip to the liquor store (after all, brewed beverages is what got entire urban generations through the middle ages, when water was tainted).
If an auditor wants to argue the hydrating effect of beer and wine, and will disallow 5% of the board expenses based on whatever sample period, then THAT will be the argument that I’ll gladly let them win. They’ll have something to “show” to their superiors and won’t have to keep digging, and I’ll pay the 10% penalty on 5% of my board expenses - literally a few bucks.
However, I DID make a point and deduct any tips shows on any receipts, as pedantic as that might seem, and if she picked up the entire tab and later split it with friends, she made a point of noting her share on the receipt. This way, one can see that we did make a genuine effort not to take undue advantage.
Regarding an audit, if there are small and various items through the college years that weren’t allowable withdrawals, but they make up only a small percentage of the total, wouldn’t the taxpayer be able to argue that it’s only the earnings that are subject to strict interpretation, and that post-tax contributions are not specifically subject to all of the rules? So if you could show that contributions were X dollars, and the rest was interest, wouldn’t there be leeway of X dollars before an auditor could complain that tax-free earnings are being abused?