Use of 529 Funds

[LaughTrack]

My child - fortunately - has a stipend - taxable income - from his college for "living expenses."   He also has a 529 fund.  Can he use the 529 to pay for textbooks, course materials, and a computer?

[Hal_Al · Accepted solution]

Q.  My child - fortunately - has a stipend - taxable income - from his college for "living expenses."   He also has a 529 fund.  Can he use the 529 to pay for textbooks, course materials, and a computer?

A. Yes.

He may also be able to "use a 529 distribution for room and board", depending on the details of the stipend. A stipend paid for "living expenses" is usually (almost always) taxable income to the student.  As such, the student has effectively paid for his room and board with his own after tax money.  As such, he can claim the room and board cost against a 529 distribution and say the stipend money "went somewhere else". 

You do not have to literally pay for the room and board with the 529 money. You only have to have qualified educational expenses in the same year as the 529 distribution was made.