529 money can be use for off campus living, but you are limited to the lesser of your actual costs or the school's "allowance for cost for attendance" (basically what on campus students pay for Room & Board).
The student must be half time or more.
You cannot count all your mortgage payment as "room". You can count actual expenses such as mortgage interest (not principal), utilities, repairs, insurance and taxes. Usually, the school allowance governs.
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You can also not double dip. That is, you can not count mortgage interest and real estate tax, if you already deduct those as itemized deductions.
