College Costs for Room & Board

[Randall]

529 money is allowed to be used for room and board.  If a student lives off campus, isn't there a chart to show costs for that college and town?  I thought I saw that in the past.

[Lion EA]

I think each school is required to provide the information based on whatever, % of their cost, geographical area, I don't know how formula is created, but I've seen such info on college websites back when our kids were students.

https://www.glassjacobson.com/blog/529-off-campus-housing/

[Randall]

Thanks.

[TexTaxToo]

Under the FAFSA Simplification Act of 2020, which went into effect for the 2023-2024 school year, schools are required to compute a Cost of Attendance (COA) for each category of student (broken down into components), and must publish these on their website (it was optional before, though many did publish it).
 
Note that schools may (but are not required to) adjust the published COA on a case-by-case basis for special or unusual circumstances, so the taxpayer may be able to obtain a different COA for their specific situation from the school (be sure to get it in writing).
 
Also, under the new law, the "room and board" component was renamed to "living expenses", which may also be listed as "food and housing".

[BulldogTom]

So we can use the school estimate for living expenses as opposed to actual costs when looking at a distribution from a 529 plan to see if it was used for living expenses when at school (like a safe harbor) ?

I had not heard that.   

Tom
Longview, TX

[TexTaxToo]

It's not really a safe harbor - for off-campus housing it's also the maximum - students living in a lavish penthouse cannot use the full actual costs, only the COA allowance.  (For on-campus housing, you can use actual costs, if higher.)

See https://www.law.cornell.edu/uscode/text/26/529#e_3_B_ii

Quote

The amount treated as qualified higher education expenses by reason of clause (i) shall not exceed—

(I)the allowance (applicable to the student) for room and board included in the cost of attendance (as defined in section 472 of the Higher Education Act of 1965 (20 U.S.C. 1087ll), as in effect on the date of the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001) as determined by the eligible educational institution for such period, or

(II)if greater, the actual invoice amount the student residing in housing owned or operated by the eligible educational institution is charged by such institution for room and board costs for such period.

 

[Randall]

Am I correct in thinking that if the whole distribtution is not used for qualified expenses, the max that is taxable is the earnings portion of the distribution and not the basis portion?

[TexTaxToo]

Yes, and the earnings are prorated.  See Pub. 970, chapter 7 for the calculation.