Education savings account

[tolmama]

Our dependent full-time student got married in June 20 24 and moved into a second home we own. We are not collecting rent, but can we use 1/2 of fair rent value as a room and board expense against money withdrawn from an ESA. Say, up to the amount of cost of attendance estimate for off-campus housing?

[RobertB4444]

If you are charging a below market rent to your relative then the house is just considered to be a second home.  You can't take any deductions for a rental property, only take deductions for property taxes and mortgage interest on schedule A if you qualify.  

But you still need to declare that below market rent as income.  

So if you want your son to pay you a below market rent on the house using money withdrawn from an ESA that is fine.  But you would need to declare the rental income on your tax return and pay taxes on it.

@tolmama 

[tolmama]

Are you not allowed a room and board expense if the student lives at home?  

[MarilynG1]

Yes, your school may calculate a 'Cost of Attendance' worksheet for you showing estimated housing costs.  You can use that amount as a Room % Board expense amount, even if your student lives at home.

Here's more info on Room & Board for Student Living at Home.

@tolmama 

[tolmama]

Thank you, would that still apply if the student lived part of the year in our second home? As per the original question?

[Vanessa A]

Yes. It does not matter that they are living in your second home, she is still living "at home". 

[Hal_Al · Accepted solution]

Q. Can we use 1/2 of fair rent value as a room and board expense against money withdrawn from an ESA. Say, up to the amount of cost of attendance (COA) estimate for off-campus housing?

A. Yes, but technically no. You have to add up your (and her) actual costs, food, mortgage interest (but not principal payments), utilities, insurance, real estate tax.  It *always* works out to using the school's COA.