Tap 529 plan to pay graduate school rent


Dear Dr. Don,
My daughter just got accepted into a full-time master’s degree program. For the past year, she has been living in an apartment with a roommate. Can I use her 529 plan funds to pay her portion of the rent while she is a full-time student Thanks,
— Ben Benefits
Dear Ben,
Within certain limitations, you can use 529 plan funds to pay the rent as long as the student is enrolled at least half time. IRS Publication 970, Tax Benefits for Education, spells it out:The expense for room and board qualifies only to the extent that it is not 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 purposes) 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 should contact the school to learn about qualified room and board costs. One rule of thumb pertains here: It’s important to take the distribution from the 529 plan in the same tax year that you pay the qualified expense.The 529 plan may also be used for utilities as long as the total expense is below the total established by the school.Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.
Ask the adviser
To ask a question of Dr. Don, go to the “Ask the Experts” page and select one of these topics: “Financing a home,” “Saving & Investing” or “Money.” Read more Dr. Don columns for additional personal finance advice.
Bankrate’s content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate’s Terms of Use.
Related Links:

5 famous former interns

7 people who went from interns to top execs

How to avoid an illegal internship

Related Articles:

Working and college aid

Savings bonds for college

Increasing financial aid

More On 529 Plans:

529 plans and continuing education costs
What you need to know about 529 plans
Student budget calculator

Comments are closed, but trackbacks and pingbacks are open.