Yes, room and board counts as a college expense and can be used against the additional penalty. Room and board is not an eligible expense to apply for a credit. Therefore, the remaining education expenses that were not paid with tax-free assistance may be used to apply for an education credit, such as the American Opportunity Credit, as long as you meet the other requirements.
According to the IRS:
“Qualified education expenses.
For purposes of the
10% additional tax, these expenses are tuition, fees, books, supplies, and
equipment required for enrollment or attendance at an eligible educational
institution. They also include expenses for special needs services incurred by
or for special needs students in connection with their enrollment or
attendance.
In addition, if the student is at least a half-time student,
room and board are qualified education expenses.
The expense for room and board qualifies only to the extent
that it isn't more than the greater of the following two amounts.
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 pur-poses) for a particular academic period and
living arrangement of the student.
The actual amount charged if the student is residing in
housing owned or operated by the eligible educational institution.
You may need to contact the eligible educational institution
for qualified room and board costs.”
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