Tap 529 plan to pay graduate school rent


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Dear Dr. Don,
My daughter just got accepted into a full-time master’s degree program. For the past year, she has been living in an apartment with a roommate. Can I use her 529 plan funds to pay her portion of the rent while she is a full-time student

— Ben Benefits

Dear Ben,
Within certain limitations, you can use 529 plan funds to pay the rent as long as the student is enrolled at least half time. IRS Publication 970, Tax Benefits for Education, spells it out:

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 eligible educational institution, 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 eligible educational institution.

You should contact the school to learn about qualified room and board costs. One rule of thumb pertains here: It’s important to take the distribution from the 529 plan in the same tax year that you pay the qualified expense.

The 529 plan may also be used for utilities as long as the total expense is below the total established by the school.

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