We have a child starting college this month and though his school is in another part of the country, he’ll be taking classes remotely for the first semester due to Coronavirus concerns. Our home is small and the school is a music conservatory, so we’re currently looking into renting a small 1-room office somewhere nearby where they would have a walled off space to take classes. This is for the sake of everyone’s sanity and price-wise should still be considerably less than we would’ve paid for room & board on campus.
I’ve seen that off-campus housing can be considered a qualified expense as far as a 529 account is concerned, up to a limit of the Room & Board number estimated by the school for off-campus students. Would this also apply to a non-residential office rental? I would assume this is a valid use of 529 funds, as the student needs a place to work, but not sure what the IRS’s stance is on it.
Anyone have any insight on this? Thanks in advance.
Just to be clear, child will be residing with parents at home for free. Question more succinctly is - can a student residing off-campus with parents rent a commercial space to do schoolwork as a 529 qualified expense? I’m guessing we won’t be the only people facing this issue with so many students needing to do college from home.
No, it’s not a qualified educational expense, and I don’t think there’s any way you can justify it as such the way the law is written now. I suppose you can raise the issue with your congressional representative to see if they can introduce an emergency bill on this matter for 2020 and 2021 tax years.
If your child will be at least a half-time student and living at home, take a 529 distribution for the school’s allowance for living off-campus, and you then have extra money available for the scenario that you suggest. Money is fungible. It doesn’t matter if you are not actually charging your child to live in your house and eat your food.
Any tax document can be audited. The question is, does it pass the smell test.
If the student is living at home while at least a half-time student, qualified 529 distributions can be taken up to the school’s published COA for the student’s particular living situation. It doesn’t matter if the parents are actually charging their child for room and board or not. Any dollar from the 529 account means there is an extra dollar that can used by the family for an expense not related to qualified 529 expenses.