Do mortgage payments count as room and board qualified education expenses?

[doctoral_student]

I have a Roth IRA. I'm currently attending a graduate program, and am enrolled fulltime at the university. I currently live in a condo near campus that I own myself and don't rent a spare room to anyone.

I know that qualified education expenses can be withdrawn from your Roth IRA without having to pay an early distribution penalty. I also know that room and board can be considered an education expense if you are enrolled more than half time. I'm curious if my housing while I'm in grad school, can be paid for to some amount using my Roth IRA, even if I'm not living directly on campus, and housing expenses take the form of HoA fees and Mortgage payments.

The reason I ask is because if this is not the case, I will likely have to withdraw from my Roth IRA anyway with the early distribution penalty. Does anyone know if this counts?

[Opus 17]

Your college should have calculated a room and board allowance that you can use.  Alternatively, you can use the fair market rental value as a room and board expense—what it would cost to rent the same or similar type of housing.  Because the mortgage payment builds equity, you can't use the mortgage directly as an educational expense, because it is both providing current housing and building equity toward the future.  But you can use FMV rental.

Let's also be clear on what is taxed and what is not taxed with a Roth IRA.  Withdrawals are always taken in a specific order; contributions first, rollover conversions second, and earnings last.

• You can withdraw your original contributions at any time and for any reason without tax or penalty.
• If you withdraw conversions less than 5 years after the conversion was made, you will owe a 10% early withdrawal penalty.
• If you withdraw earnings before age 59-1/2, you will pay regular income tax plus the 10% early withdrawal penalty.

The education exception applies to the 10% early withdrawal penalty on conversions and earnings, but does not exempt you from regular income tax on the earnings.  And much of your withdrawal will probably be contributions (at least, at first) which are always tax-free.  

[doctoral_student]

Thanks for the reply. How about my HoA fees? Those don't build equity.

[Opus 17]

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@doctoral_student wrote:

Thanks for the reply. How about my HoA fees? Those don't build equity.

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Eligible room and board expenses are defined here.

https://www.irs.gov/publications/p970

You can use your actual cost for room and board, except that you can't claim more than whatever your institution has determined as the room and board allowance included in their "cost of attendance" when they prepare financial aid packages. (You can only claim more than the "cost of attendance" allowance if you are living in university housing and they are charging you more than what they set as an allowance). 

The cost of room and board qualifies only to the extent it isn't more than:

• The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student; or

• If greater, the actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.