As I see it, the security deposit is exactly that - a deposit. The landlord is holding it, but it's still your money. You haven't spent it. You will presumably get the deposit back when your daughter moves out (unless she trashes the apartment). If you are able to use the security deposit to pay the last month's rent at the end of the lease, then you are paying it at that time, not now. So I don't think you can use money from the 529 to pay a deposit that you are eventually going to get back.
@Bsch4477 @Hal_Al What do you think?
In some states or cities landlords have to pay interest on security deposits. In that case you have interest income that you have to report on your tax return. You might get a Form 1099-INT for the interest.
