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529 Distribtions for at-home student

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  • 529 Distribtions for at-home student

    My daughter will be starting college in a month. She'll be living at home. Her school lists R&B at $16,820 per year, and does not differentiate between on-campus / off-campus / at home costs.
    We have a lot more in the 529 plan than she will use, and would like to withdraw it tax-free if we can.

    If there are no at-home costs listed, is it allowable to use on-campus costs?
    Is a print out of a webpage sufficient documentation for 529 withdrawal, or does IRS require more than that?
    If that amount is payable to me, is that taxable income?

  • #2
    Originally posted by molar roller View Post
    My daughter will be starting college in a month. She'll be living at home. Her school lists R&B at $16,820 per year, and does not differentiate between on-campus / off-campus / at home costs.
    We have a lot more in the 529 plan than she will use, and would like to withdraw it tax-free if we can.

    If there are no at-home costs listed, is it allowable to use on-campus costs?
    Is a print out of a webpage sufficient documentation for 529 withdrawal, or does IRS require more than that?
    If that amount is payable to me, is that taxable income?
    Yes, she can use at-home costs as long as they d/n exceed the allowable off-campus costs. I have never been asked this question before, but I would presume that the funds w/b treated as expense sharing rather than income to you. However, if you deduct mortgage interest and RE taxes, I do wonder if the deduction s/b reduced.

    If you were a client, we would prob want to create some type of calculation to reflect how you determined the cost of housing your child, such as cost of food, utilities, maintenance, etc. Seems like food for a year c/b rather significant on its own. I don’t think you have to go overboard, just an attempt to show you are being reasonable and not simply just taking out the maximum possible.
    Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      From Publication 970, Qualified Tuition Program (QTP), Qualified Higher Education Expenses
      3. 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
      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.

      You may need to contact the eligible educational institution for qualified room and board costs.

      On-campus room and board costs can only be used when those are actual costs. The higher educational institution is required to publish on-campus, off-campus and living at home costs in order to be able to distribute federal financial aid. Typical living at home costs are 35% - 45% of on-campus costs.

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      • #4
        Yes. it is allowable per IRS publication (see above). Cannot exceed the allowance published in COA or an actual amount charged should they be on campus (ie you can't take out 10K when the campus bill is 8K or the published amount is 9K). When living at home, there are no charges so it would need to be reasonable in the eyes of the IRS. You might want to call the financial aid office. Just because it is not on their website does not mean they don't have that information. It may be published in print form but not necessarily online.

        I would keep good records like with any withdrawal from the 529 because it's basically on the honor system (and if audited would need to provide). I screen shot the cost of attendance tables every year and paste it to the excel sheet i use to track expenses that i pull out of the 529.

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        • #5
          Wow! This is a great question.

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          • #6
            Thank you all.
            I've contacted the Student Accounts office and will wait for their info.

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            • #7
              While the Student Accounts Office may be able to provide that information. It is the Financial Aid Office that estimates the cost of attendance (COA). Without the COA, they can not calculate and distribute federal financial aid.

              Anecdotally, my two daughter's school's living at home R&B COAs are 38% and 40% respectively of the on-campus R&B COA. Just be aware that some schools are ridiculous with their living at home estimates. For the 2021/22 school year, Boston College in a HCOL area lists R&B COAs as on-campus = $15,602, off-campus = $11,550 and living at home = $1,500.

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              • #8
                Originally posted by spiritrider View Post
                While the Student Accounts Office may be able to provide that information. It is the Financial Aid Office that estimates the cost of attendance (COA). Without the COA, they can not calculate and distribute federal financial aid.

                Anecdotally, my two daughter's school's living at home R&B COAs are 38% and 40% respectively of the on-campus R&B COA. Just be aware that some schools are ridiculous with their living at home estimates. For the 2021/22 school year, Boston College in a HCOL area lists R&B COAs as on-campus = $15,602, off-campus = $11,550 and living at home = $1,500.
                For us kind of folk who are trying to take out the maximum tax free from a 529 that really sucks. For the average person who takes out as many loans as allowed it might help them.

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                • #9
                  Originally posted by spiritrider View Post
                  While the Student Accounts Office may be able to provide that information. It is the Financial Aid Office that estimates the cost of attendance (COA). Without the COA, they can not calculate and distribute federal financial aid.

                  Anecdotally, my two daughter's school's living at home R&B COAs are 38% and 40% respectively of the on-campus R&B COA. Just be aware that some schools are ridiculous with their living at home estimates. For the 2021/22 school year, Boston College in a HCOL area lists R&B COAs as on-campus = $15,602, off-campus = $11,550 and living at home = $1,500.
                  That makes no sense. I live a few miles from BC and $1500 to live at home is laughable. Same for living off campus, you'll spend double that allowance just on rent.

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