What living expenses qualify for 529 plan disbursement for off-campus student?

Yes, you can use 529 funds for certain living expenses even when your student lives at home, but there are specific rules to follow. The IRS allows 529 withdrawals for "qualified higher education expenses" which includes room and board for students enrolled at least half-time. For students living at home, you can withdraw an amount up to the school's published "cost of attendance" figures for off-campus housing - even if your actual costs are lower. Check your school's financial aid website for their official "cost of attendance" budget for off-campus students. This is the maximum amount you can withdraw tax-free for housing and meals. Keep documentation showing your student was enrolled at least half-time each semester you take withdrawals, along with records of the school's published cost of attendance figures. I'd recommend keeping detailed records of all housing-related expenses (portion of mortgage/rent, utilities, food) that you're attributing to your student, along with documentation of their full-time enrollment status each semester.

I went through exactly this situation with my daughter last year and discovered this amazing tool called taxr.ai (https://taxr.ai) that saved me so much confusion over 529 qualified expenses. I was totally lost about what documentation I needed for her off-campus expenses until I uploaded her school's cost of attendance PDF and my receipts. The tool instantly showed me that I could claim up to the school's published room and board allowance ($12,400 at her college) even though she was living at home with us. It also flagged which expenses were safe to claim and which might trigger an audit. Super helpful when dealing with these gray-area 529 questions!

I tried taxr.ai after seeing it mentioned here and it was incredibly helpful for my situation! I was about to just divide my kid's college "off-campus" allowance by 9 months, but the tool showed me why that could be problematic. Instead, I followed their recommendation to document our actual household expenses (mortgage, utilities, food, internet) and calculate my son's proportional use. They also provided a template for keeping records that would satisfy IRS requirements if questioned. The most valuable part was uploading my school's specific cost of attendance document and getting confirmation that I could withdraw up to that amount for my son's living expenses at home. They even pointed out a special provision for 2025 that my accountant hadn't mentioned regarding internet expenses for students! Definitely worth checking out if you're navigating 529 withdrawals.

After spending HOURS on hold with the IRS trying to get clarity on 529 qualified expenses for my daughter living at home during college, I finally used https://claimyr.com to get through to a real person. You can see how it works here: https://youtu.be/_kiP6q8DX5c It was a total game-changer - within 20 minutes I was talking to an actual IRS agent who confirmed that I could withdraw up to the school's published off-campus housing allowance for my daughter living at home. She also explained exactly what documentation I needed to keep (enrollment verification, school's cost of attendance figures, and reasonable records of household expenses). I was really surprised how quickly I got through when I'd previously wasted entire afternoons on hold. The agent was actually super helpful and even sent me the relevant IRS publication sections.

I have to eat my words about being skeptical. After struggling with 529 questions for weeks and getting disconnected THREE TIMES after waiting on hold with the IRS for 2+ hours each time, I tried Claimyr out of desperation. It actually worked exactly as described. I filled out what I needed help with, and about 2.5 hours later (while I was grocery shopping), I got a call connecting me to an IRS agent who specialized in educational benefits. She confirmed everything about using 529 funds for a student living at home and walked me through the exact documentation needs. The agent told me that as long as my son is enrolled at least half-time, I can use 529 funds up to the school's published off-campus housing allowance for his living expenses at home - WITHOUT needing to create artificial rent payments. This was exactly the confirmation I needed before making withdrawals. Definitely worth it for the peace of mind alone.

Just to add a warning - be careful about how you document these expenses. My nephew got audited last year over 529 withdrawals for "room and board" while living with his parents during college. The IRS agent wanted to see a formal rental agreement and proof of payments between him and his parents. They ended up having to pay taxes plus the 10% penalty on about $8,000 because they couldn't adequately document that the money was actually used for qualified living expenses. Apparently, just withdrawing the funds and saying "it's for housing" wasn't enough.

FYI - I'm a financial aid counselor (not a tax advisor), and I see confusion about this ALL THE TIME. Here's what students at our university are told: 1) The "room and board" component of our Cost of Attendance is the MAXIMUM amount that can be withdrawn tax-free from a 529 for living expenses. 2) For students living at home, you can still use this allowance BUT you should document: - Student's enrollment status (at least half-time) - The official Cost of Attendance figures from the school - Reasonable expenses that benefit the student (portion of rent/mortgage, utilities, food) 3) You DON'T need a formal rental agreement between parent and child, but some families create one for extra documentation. Most importantly: Keep good records! The burden of proof is on you if questioned.

As someone who went through this exact situation with my daughter two years ago, I can confirm that you absolutely CAN use 529 funds for living expenses even when your student lives at home. The key is understanding that the IRS allows withdrawals up to the school's published "cost of attendance" for off-campus housing, regardless of your actual out-of-pocket costs. Here's what worked for me: 1) I downloaded my daughter's school's official Cost of Attendance document which showed $13,200 for off-campus room and board 2) I kept records showing she was enrolled full-time each semester 3) I documented household expenses that reasonably supported her (groceries, utilities, her portion of mortgage interest) 4) I withdrew exactly the amount listed in the school's off-campus allowance The beautiful thing is you don't need to create artificial rent payments or formal agreements. The IRS recognizes that housing a college student at home involves real costs. Just make sure you have the school's official cost figures and can show reasonable household expenses if ever questioned. One tip: Don't overthink the documentation. Keep it simple but thorough - enrollment verification, the school's published allowance, and basic household expense records. That's really all you need.

This is such a helpful thread! I'm in a similar situation with my son who's living at home while attending community college full-time. One thing I haven't seen mentioned yet is timing - do you need to take the 529 withdrawal in the same calendar year as when you pay the expenses, or can there be some flexibility? Also, for those who've been through audits or have experience with documentation, what's the best way to organize records? Should I keep a separate folder for each semester, or is there a better system that makes it easier to show the IRS agent if questioned? I'm being extra cautious because my son's college has a relatively high off-campus allowance ($14,800) and I want to make sure I'm not setting myself up for problems down the road.

One thing to keep in mind that I learned the hard way - make sure your student is actually enrolled "at least half-time" according to the school's definition, not just taking what feels like a lot of classes. My daughter was taking 2 classes one semester that I thought qualified as half-time, but the school defined half-time as 6 credit hours and her classes were only 5 credits total. I had already taken a 529 withdrawal based on the housing allowance before realizing this mistake. Had to pay taxes and penalties on that withdrawal because she didn't meet the enrollment requirement. Now I always verify the exact credit hour requirements with the school's financial aid office before making any withdrawals. Also, don't assume that summer enrollment counts the same way - some schools have different half-time definitions for summer terms. Always double-check the enrollment status each term before withdrawing funds!

This thread has been incredibly helpful! I'm dealing with a similar situation where my daughter is living at home while attending university full-time. One question I haven't seen addressed - what about transportation costs? Since she's living at home instead of on campus, she needs to commute to classes daily. Can gas, parking permits, or public transportation costs be considered qualified expenses under the 529 rules? Also, for those who've successfully navigated this, did you find it helpful to create a simple spreadsheet tracking monthly expenses that benefit your student? I'm thinking of documenting things like her portion of groceries, utilities, internet, and other household costs to make it easier if I ever need to justify the withdrawals to the IRS. The $12,800 off-campus allowance at her school seems reasonable for our area, but I want to make sure I'm approaching this correctly from the start rather than scrambling to gather documentation later.

I wanted to add one more important consideration that hasn't been mentioned yet - make sure to coordinate 529 withdrawals with any American Opportunity Tax Credit or other education tax credits you might be claiming. You can't "double dip" by using the same expenses for both a tax-free 529 withdrawal AND a tax credit. For example, if you're using tuition payments to claim the AOTC, you can't also count those same tuition dollars as qualified 529 expenses. However, since you're looking at using 529 funds for living expenses (room and board), this typically won't overlap with education credits that are usually based on tuition and required fees. Just something to keep in mind when doing your tax planning - you want to optimize which expenses you use for 529 withdrawals vs. tax credits to get the maximum benefit. A tax professional can help you figure out the best strategy for your specific situation, especially if you're dealing with multiple funding sources for college costs.

I'm in almost the exact same situation and have been researching this for weeks! What I've learned is that you absolutely CAN use 529 funds for living expenses when your student lives at home, but the key is understanding the "cost of attendance" concept. Here's what I found out: Even though your child isn't paying rent to a landlord, the IRS recognizes that housing a college student involves real costs. You can withdraw up to whatever your school publishes as their "off-campus room and board" allowance in their official cost of attendance figures - this becomes your maximum tax-free withdrawal amount for housing expenses. For documentation, I've been keeping: - Official enrollment verification each semester (showing at least half-time status) - The school's published cost of attendance document - Records of household expenses that benefit my student (portion of utilities, groceries, internet, etc.) The beauty is you don't need to create artificial rent agreements or transfer specific amounts to your child. Just document that you're covering legitimate housing costs up to the school's published allowance. I'd suggest checking your college's financial aid website for their official cost of attendance breakdown - that's your roadmap for how much you can safely withdraw.

I went through this exact situation two years ago with my son who was living at home during his sophomore year. The key insight that saved me a lot of stress was realizing that the IRS doesn't require you to prove specific dollar-for-dollar expenses - you just need to stay within the school's published off-campus housing allowance and maintain reasonable documentation. What worked for me was creating a simple monthly tracking system. I kept a basic spreadsheet showing my son's proportional share of household costs (mortgage interest, utilities, groceries, internet) and made sure the annual total stayed well below his school's published room & board allowance of $11,200. I never had to create fake rental agreements or transfer money back and forth. The most important thing I learned: Get the school's official Cost of Attendance document and keep it with your 529 records. That document is your protection - as long as your withdrawals don't exceed the published off-campus allowance and your student is enrolled at least half-time, you're on solid ground. I've never been audited, but I feel confident that my simple documentation approach would hold up if questioned. One tip: I also kept screenshots of my son's student portal showing his enrollment status each semester, just to have that verification easily accessible. Much easier than requesting official transcripts later if needed.