Michigan Education Trust

[JACOB033]

My son is a full-time student in Michigan attending WSU and received a full tuition scholarship. Therefore, we terminated part of his Michigan Education Trust contract. We would like to use the funds to pay for his rent as he is living in an apartment next to campus. Would this be a qualified educational expense and if so, what do we need to do when we file taxes next year?

[AmyC]

It depends. Michigan Education Trust is a 529 plan. The distributions from a 529 are not taxable when used on 529 qualified Room and Board  and Qualified Education Expenses - Internal Revenue Service.

• If WSU has off campus housing room and board expectations published, you can use those amounts tax free from the 529. Usually, a school has expenses expected on their website.
• If WSU does not have something for campus housing, it is worth calling them to see what you can get in writing. 
• If there is no information and no listing, you could not take a tax free distribution. 

A private penthouse with a guarded gate would not meet the average student housing expectations and would be taxable for any amount beyond what the college lists.