I understand what you are saying. I have a daughter in college and I pay her tuition, room & board with 529 funds. The difference is, tuition qualifies for tax credits, like the American Opportunity Credit, room & board does not. Moreover, many students don't live on campus, so they don't pay their rent to the school, therefore it wouldn't be on the 1098-T even if schools included room and board. Even though the room and board doesn't qualify for a tax credit or deduction, it is a qualifying expense that can be paid from a 529 plan without incurring a penalty. The catch is that you have to enter the room and board in the education expense section. I originally missed that, because you have say you paid for "books or materials to attend school". I don't know why it doesn't ask if you paid room and board!
