So, your student is moving out of the dorms and into an apartment this year. Can you still use your 529 funds to pay for housing? Yes. Do they need to save every single grocery store receipt in order for you to do so? No.
Room and board expenses qualify as educational expenses– i.e., you can use your 529 money to pay for them– regardless of where the student lives (on-campus or off) as long as the student is enrolled at least half-time. However, for off campus housing the expense is “qualified” only up to the allowance for room and board that the school itself uses in its cost of attendance figures. (A “qualified higher educational expense” or “QHEE” is one for which you can use “qualified” or tax-advantaged funds such as 529 plans.) Which means, the qualified amount– the amount for which you can use 529 funds– is determined by the school, not by your actual costs. You can generally find that amount on the school’s website under Cost of Attendance. The good news is, you don’t need to collect grocery receipts from your student. The bad news is, you might be paying room and board expenses beyond what you can spend 529 dollars on.
For students living on campus, the full cost of room and board is qualified.
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So what do you do, estimate,take the maximum possible?
Great question and a huge source of confusion. Each school publishes its own off-campus living cost. You can withdraw the lesser of that amount or actual room and board costs from your 529 account. So, if your school’s off-campus cost is $10,000 and your total cost is $12,000, then you can use $10,000 from your 529 and the remaining $2000 is on you. On the other hand, if you only spent $8,000, then $8,000 would be your maximum. Check your school’s cost of attendance page or ask the registrar or financial aid office if you can’t find it.
What if the college does not have housing?
Even if the college doesn’t offer housing, they will still have a housing allowance. You can contact the financial aid office to get the number as it’s specific to each school.