Off campus room and board 529 plan allowable claim amount

[mimi57001]

My son lived on campus for the first year and is going to live off campus starting this fall.  The CLA estimate listed on the school website for 2022-2023 is a lot lower than the actual amount charged to us for the school year 2021-2022.  Actual on campus room and board charges vary based on which meal plan you choose and which room in which residence hall that you choose.  There are several different cost listed on the different webpages on his school websites. 

So my question is which amount we can use as his off campus room and board amount to claim for eligible expense in 529 plan ?

1) The actual room and board amount charged to him for the first year he lived on campus even though it was from last year and would be lower than this year, or 

2) The estimate listed on the cost for 2022-2023 admission website, or

3) The actual 2022-2023 meal plan cost (weekday meals only) listed on the school website that off campus students can pick + the cost of a room in a resident hall that has similar unit as the one he will be living off campus, or

4) The actual 2022-2023 meal plan cost listed on the school website that on campus students can pick (there are 3 different plans.  Can we pick the most pricy one?) + the cost of a room in a residence hall that has similar unit as the one he will be living off campus.

Thanks for your help in answering my question!

[Carl]

for 529 distributions, when living off campus, you can not claim more for room and board than you would pay living on campus. So if the student was living on campus, what would you be paying? The highest cost one? Or one below that? Same thing for the meal plan. That is what you can claim.

There is one exception that allows you to claim the actual costs of living off campus, if you qualify.

If the school does not offer on campus housing, or if the student has a letter from the college informing them that on campus housing is not available, then you can claim actual costs of living off campus. Note that a letter is needed for each semester the student is enrolled in.

For the "board" part, if the school does not offer meal plans, then you can claim actual costs. Take note that for both room and board the costs incurred must be reasonable. So no $5000/mo penthouse suites or steak and lobster for lunch and dinner every day. 🙂

Also take note that room and board costs are not deductible if the student is not enrolled. So if they are renting accomodations off campus and do not enroll during the summer semester, the room and board for those 2-3 months are not deductible expenses from the 529 distribution.

[mimi57001]

Hi, Carl

Thanks for your response!  Just want to make sure that I get it right.  If I will be paying the higher dorm cost and meal plan assuming my son lives on campus as an enrolled college student, I can claim that higher cost, right?  For room cost, I could pick the one that he used to live on campus or the dorm that would be closer to the cost of the off campus apartment.  For board cost, I could pick the meal plan that he used to have when living on campus or the most pricy meal plan to match what he would be spending living off campus.  I mean there are so many different prices for dorm and meal plan that his college offers for living on campus.  I could pick the most pricy on campus dorm and meal plan if I want to anyway, right?  

By the way, thanks for pointing it out that if he is not enrolled in the summer, he cannot claim the cost.    

[NCperson · Accepted solution]

@mimi57001 - here is what the IRS states - you can't just choose the highest on-campus plans

See page 51 bottom right.

https://www.irs.gov/pub/irs-pdf/p970.pdf

Expenses for room and board must be incurred by students who are enrolled at least half-time (defined later). The expense for room and board qualifies only to the extent that it isn't more than the greater of the following two amounts.
a. The allowance for room and board, as determined by the school, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.
b. The actual amount charged if the student is residing in housing owned or operated by the school.

since your child is living off campus item b) wont' apply.  So you are limited to actual expenses for room and board for whatever the federal financial aid allowance is, whichever is LOWER. 

it may be in fact be #2 in your original post if that estimate ties to the federal financial aid requirements. I would expect that if you have to use the fedeal financial aid requirements, it's going to be the lowest one available.

Suggest checking with the financial aid office at the school as they will know what is used for room and board allowance fro federal financial aid purposes

the issue of the summer expenses - both room and board - probably is a non-issue since you are limited by the federal finacial aid requirements, which wouldn't include non-school / summer time in any event. 

[mimi57001]

Thanks NCPerson!  That was what I initially suspected.  The estimate listed on the school website is much much lower than the actual expenses we paid out to the school when my son lived on campus last year.  I don't understand why they would list a much lower on campus room and board estimate than the actuals.  Maybe just to paint a picture that their cost of admission isn't that high to lure the kids in.     

Anyway, I will contact the school to confirm the estimate.  Thanks for the clarification!