D has been accepted into several colleges and the rest will happen in April.
One of her EA schools is of greater-than-normal interest so we’d like to put down a partly refundable $600 deposit for housing now (to gain a better dorm). However, if a better-fit school comes along in April, we would withdraw that acceptance and lose a % of the original money.
Can we withdraw money from 529 for this?
You need to have enough qualified expenses through the entire year to cover any 529 distributions taken in the year. If you withdraw money now for the deposit and she doesn’t attend and any or all is refunded, you are still likely to have enough expenses for the fall semester that you could adjust distributions then for the refunded amounts.
I’m not sure though if even the non-refunded amount would be a qualified expense since she didn’t wind up attending the school. I think a required deposit would have to wind up being applied to her college bill to be qualified which wouldn’t be the case if she chose another school.
http://www.savingforcollege.com/articles/i-withdrew-too-much-529-money-669
Maybe you can draw a conclusion from the examples in this article.