Can a 529 withdrawal be reported as a qualified expense when used to pay for room and board for a dependent, full-time college student who lives at home?

[dan-segal]

My son is a full-time college student who lives at home.  I claim him as a dependent, and  I pay monthly child support to his mother to cover his room and board, as stipulated in the divorce settlement.  I have a 529 account with my son named as beneficiary.  Can I withdraw from the 529 to cover his child support expenses?  Since the money is applied to his room and board, is it considered a qualified expense?

[SweetieJean]

Ask the financial aid department for the room and board allowance for students living at home with parents,

[Carl]

I'm not providing a definitive answer here, so will post this as a comment. I say no you can't claim it as a qualified expense. Period. While room and board is a qualified expense for a 529 plan, since you claim him as a dependent and he lives in your household and not a college dorm or other off campus rental for which actual rent is paid, there are no room & board expenses to claim. If actual room and board were paid with those funds, then it would have to be claimed as taxable income by the recipient of that payment. Most likely, your ex who is receiving the payment, which you clearly identify as child support paid to your ex, and not a room and board expense paid to an entity qualified to receive it,  does not pay taxes on that money, and doesn't even have to report it in most cases. You pay taxes on that money before you pay that child support.
If this was alimony, things would be different tax-wise.

[SweetieJean]

See this:
<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/1681645-my-son-is-living-at-home-while-full-time-student-at-colleg...>

[SweetieJean]

Why are you claiming him as a dependent if he does not live with you?

[Hal_Al]

Yes, but not exactly. You may NOT count the amount you pay as child support. Room & Board are qualifying expenses for a tax exclusion on the earnings on a 529 plan withdrawal. For students living off campus, the allowable amount is actual cost or the amount charged by the school for on-campus students; whichever is less. For students living at home, the amount allowed is further limited to the amount the school allows for financial aid. See https://ttlc.intuit.com/questions/1681645-my-son-is-living-at-home-while-full-time-student-at-colleg...

[SweetieJean]

See #5 here:

http://www.forbes.com/sites/josephhurley/2016/02/04/dont-make-these-mistakes-when-reporting-529-plan...

[Carl]

The way the post is worded makes all of this highly questionable. To paraphrase, "I use the 529 money to pay child support to cover room and board expenses". That's not paying room and board. That's paying child support. What the recipient of said child support uses it for, does not qualify the payer of that child support to take the deduction for that 529 withdrawal, against the room and board allowance. I would suggest they consult with a tax professional who can then look at the paper trail of that money from the IRS's perspective, and see what it looks like. Based on what I read and the way I interpret the post, child support was paid by the OP using 529 funds - which is NOT a qualified expense. Were I an IRS agent, then based solely on the information provided, the specific way that information is worded,  and my interpretation of it, I would not allow the 529 deduction for room and board. Only for the other qualified education expenses.

[Hal_Al]

A paper trail is not needed. All that needs to happen is that the student-beneficiary has qualified expenses in the same tax year that the 529 plan withdrawal was made. In fact, unlike claiming a tuition credit, the student-beneficiary does not even have to be a tax dependent of the 529 plan owner/recipient.

For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the 1099-Q can be either the owner or the beneficiary depending on where the money was sent. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". If any of the distribution will be taxable, after coordinating with scholarships and tax credits, the owner should consider have the distribution made to the student rather than himself.