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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