Need advice for 1st time using 529 for off campus living

<p>Hello I hoped someone who has used 529 Account distributions for off campus living could give me basic guidelines. Our daughter will be entering her junior year in the fall , and has rented an apartment 5/1/14 with her suitemate . I've read many hours online and contacted the financial institution that holds the 529 . All advice is similar and most point to IRS guidelines. The amount the school reports for financial aid is 10,500 Her half of the rent will be 5220 leaving 5280 a year for food , elec. and internet access. My questions are :</p>

<ol>
<li>Do you have the distributions sent in the childs or your name ? </li>
<li>They moved in May 1st as apartments became available from students leaving , can the rent and expenses over the summer come from the 529 fund ? This one I'm worried about. ( yes they are both full time students )</li>
<li>Is it as simple as having her save all cancelled checks , bills and grocery receipts ? ( She is working for the 1st time in college, going to school and working in another state I'll probably hire an accountant to do my taxes for the 1st time in my life )</li>
<li>I'll have to decide how much of the remaining available funds to allow for expenses , I think 100 + a week is too much for elec , food and internet I doubt she'll spend it all . I suppose take out enough for rent and say half of remaining available and reassess before the end of the tax year.</li>
</ol>

<p>Thanks for reading this long post , any advice or guidance is appreciated ! Fidelity Investments suggested seeing an accountant for these questions , I've done well in the past soliciting advice from forums . </p>

<p>I prefer to have distributions sent in the student’s name:</p>

<p><a href=“The best way to withdraw 529 funds without incurring taxes or penalty”>http://www.savingforcollege.com/articles/the-best-way-to-withdraw-529-funds&lt;/a&gt;&lt;/p&gt;

<p>Another way to approach qualified living expenses is if the college lists an estimated cost for living off campus.</p>

<p>I have funds sent in my S’s name. So the amount your school estimates for off-campus living is the $10,500? That is what I used for my S - the off-campus estimate. We withdrew that much from his 529 each semester for living expenses. I withdraw a semester’s worth of living expenses and put it in his checking account for him to pay his expenses.</p>

<p>His rent was about $700, that allowed about $500 a month for food. He does not in theory use 529 funds for summer rent, although I think he has leftover funds from the semester withdrawals that he does use. I do not have him save any receipts, though he pays his rent by check. From my reading I think the IRS is OK using the school estimate for off-campus expenses rather than trying to keep track of every food purchase.</p>

<p>I did the same thing for my older D, and it has not been questioned by the IRS. She has been out of school for a couple of years. I did keep a printout of the school estimated each year.</p>

<p>Everything that I have read recommends that you save receipts for both room and board when living off campus:</p>

<p><a href=“Record-keeping for Your 529”>Record-keeping for Your 529;

<p><a href=“http://www.boston.com/business/personalfinance/managingyourmoney/archives/2012/07/living_off_camp.html”>http://www.boston.com/business/personalfinance/managingyourmoney/archives/2012/07/living_off_camp.html&lt;/a&gt;&lt;/p&gt;

<p><a href=“How A 529 Plan Affects Your Taxes | Bankrate”>http://www.bankrate.com/finance/college-finance/tax-savvy-ways-tap-529-plan.aspx&lt;/a&gt;&lt;/p&gt;

<p><a href=“http://www.usnews.com/education/best-colleges/paying-for-college/articles/2012/08/20/know-what-you-can-buy-with-529-savings-plan-distributions?page=2”>http://www.usnews.com/education/best-colleges/paying-for-college/articles/2012/08/20/know-what-you-can-buy-with-529-savings-plan-distributions?page=2&lt;/a&gt;&lt;/p&gt;

<p><a href=“http://blog.collegesavings.org/2013/04/529-plan-uses-part-ii.html”>http://blog.collegesavings.org/2013/04/529-plan-uses-part-ii.html&lt;/a&gt;&lt;/p&gt;

<p>IRS 970 states for QEEs:</p>

<p><a href=“http://www.irs.gov/publications/p970/ch08.html”>http://www.irs.gov/publications/p970/ch08.html&lt;/a&gt;&lt;/p&gt;

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<p>Thanks for posting that entomom, that is what I have been going by. I can’t imagine the IRS wants to audit my S for his 529 withdrawals, and check all his debit card transactions for groceries. The amounts we withdraw are not out of line in any way to raise a red flag. The 1098-T lists tuition only, and I don’t recall anywhere it states if the student lives on or off campus, how would the IRS even know? We have been withdrawing roughly the same amount each year.</p>

<p>D1 didn’t live off campus for UG, but she’s in prof school now and this is the method I’m using, luckily the school gives living allowances for each year of the program since they vary due to away rotations. I also have gross estimates of her actual living expenses: actual rent, and lowball utilities and food allowances. Since her 529 funds aren’t going to cover all of her costs for the program, I’m making conservative withdrawals each year that won’t be a problem explaining if the need arises.</p>