My mother-in-law has a 529 plan for my son. He is going to be living in a rental house off-campus with three other students this year. Can he use the 529 plan to pay for his portion of the rent, food and utilities?
Yes, but not necessarily the full cost. As long as your son is enrolled at least half-time in a degree program, room and board qualify as eligible expenses to be covered by tax-free withdrawals from the 529 plan. But the maximum amount permitted for off-campus living cost is the amount the college cites as the off-campus room-and-board figure for federal financial aid purposes. Ask the college's financial aid office for the number it reports to the Department of Education.
Utilities and other reasonable living costs can be included, says Joe Hurley, of SavingforCollege.com, as long as the total doesn’t exceed the school’s official room-and-board figure.
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For more information about using money from 529 plans and other accounts for college expenses, see Take Advantage of Education Tax Breaks.
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529 Plans: A Powerful Way to Tackle Rising Education CostsContributions to 529 plans grow tax-free and are not taxed when they are used to pay for qualified educational expenses for the beneficiary.
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Tax Tips for Transferring Excess 529 Plan Funds to Roth IRAs: The Tax LetterThe Tax Letter 529 plans can help blunt the cost of paying for college. But if you want to use leftover funds there are some tax tips to bear in mind.
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529s: No Longer the Ho-Hum Investing Device for CollegeChanges to the plans allow for the savings to be rolled into a Roth IRA, as long as certain rules are met, if a child decides not to pursue their education.
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529 Plans: Give the Gift of Education (and Compounding)As the cost of college tuition skyrockets, parents and grandparents can take advantage of tax-efficient 529 plans and higher limits on gift and estate taxes.
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Have Leftover 529 Funds? Expert Strategies for Unused BalancesExcess 529 funds represent both a challenge and an opportunity, and knowing your options is essential.
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Using a 529 Plan? Here’s What to Keep in MindAs the school year progresses, ensure you’re using the money for qualified expenses and keeping track of documentation. Taxes and options for unused funds are also considerations.
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Three Reasons You Need to Use a 529 Plan (and Two Reasons You Don't)Tax benefits and a Roth IRA feature make 529 college savings plans attractive, but they're not a one-size-fits-all option.
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529 Plans Get a Boost With Tax-Free Rollovers to Roth IRAsThanks to the SECURE 2.0 Act, you're now able to roll over funds from your 529 into a Roth IRA, as long as certain conditions are met.
