Dear Dr. Don,
My son is in the process of purchasing a condominium. He will be enrolling in graduate school in the fall. Can he pay a portion of his note with 529 funds, subject to the cost of attendance figures, for room and board?
— David Duplex
The answer is yes. Room and board is considered (and here is the key phrase) a “qualified education expense.” The timing of the withdrawals from the 529 plan to pay room and board must be for the year the expense was incurred.
You alluded to these limits in your question. IRS publication 970, Tax Benefits for Education, spells it out in detail. Some excerpts below:
Expenses for room and board must be incurred by students who are enrolled at least half time. The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts:
- 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.
- The actual amount charged if the student is residing in housing owned or operated by the school.
Note that “a student is enrolled ‘at least half time’ if he or she is enrolled for at least half the full-time academic workload for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled.” Standards for graduate school full-time workloads may differ from those for undergraduates.
Your son should consider speaking with a tax professional if he’s uncertain about the timing or size of the withdrawals from his 529 plan account for room and board.
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