Does anyone know how to use 529 account money to pay for food when child is not on college meal plan? Can I pay her directly? How? Does she need to keep receipts? I know that the amount can’t be more than the university’s posted board amount but that doesn’t tell me how to go about doing it. Thanks in advance.
You need to ask your 529 plan administrator what is needed. Do they just need the COA showing the meal plans? Do they need something else? Some people do save the receipts and get reimbursed, but then you have to front the money and get paid back (in the same tax year?)
My daughter just transferred from an out of town school to a local one and is living at home. I called my 529 person to ask about food. She said I can’t use 529 money for food. She seemed sympathetic to my point that it seemed unfair, just because someone else was doing the cooking, food is food. She said she thought that possibly it’s against the rules because it’d be hard for parents to prove. I thought that was unfair and presumed fraud in advance!
And seemed to be about their convenience. Anyway that’s what she said.
From irs Pub 970:
Board = food. Perhaps the situation is tricky when the board is being provided by parents at the family home. But otherwise, the language above includes “board.” Record-keeping is more of an issue with the irs than with the 529 Plan administrator, so I think consulting with a tax advisor would be a good idea.
@BelknapPoint do you know about this?
We looked at the estimated off-campus expenses provided by the school; we knew the rent was a fixed amount, and just used an estimated average monthly food, i.e. if the school said $500, we used $400. Our 529 plan administrator never asked us about expenses, we just withdrew whatever amount of money we wanted. I saved printouts of the school estimation, figuring we would be OK if we were under their amount. I had some receipts because he still ate on campus some, but assumed the chances were slim they would come looking for more as long as the amounts were reasonable.
My daughter got questioned by the IRS on another type of 529 withdrawal issue, the year she graduated and only had half a year’s expenses. She withdrew the funds and paid her last semester tuition in January. But that was not related to food and was quickly cleared up when she pointed out to them that she was actually in school for a semester that year, and withdrew an extra amount due to her academic scholarship. She had properly paid tax on the earnings portion of the extra withdrawal. We have found the IRS to be reasonable when dealing with them provided we can explain our numbers.
Food/groceries for half-time or above students living off campus is a qualified 529 expense, despite what amylou2 was told by her 529 person. You just can’t exceed the school’s published COA room and board allowance. Keeping receipts technically isn’t necessary, but better safe than sorry might apply. Also, make sure that the 529 distribution takes place in the same calendar year as the expense that it covers was incurred.
My son lives off campus, I subtracted his rent (fixed monthly rate) from the school’s published COA for room and board and transferred the difference to his checking account to buy food. He usually uses a debit card so if we had to prove to the IRS $ was used for food there’s a bunch of withdrawals on record for groceries or fast food. Fortunately I haven’t been audited yet so no idea what IRS would want as proof.
I never heard of keeping receipts for food for a 529. As long as you stay near the estimated cost of attendance for the college, there should not be an issue. If you try to claim $10,000 a year for 529 food expenses, I think the IRS would have a problem with that.
The IRS will sometimes ask for proof of 529 expenses after you file your federal income taxes. I had to do it during the first year I had 529 expenses for each of my kids. They don’t demand itemized receipts, as long as your costs are in a normal range. The IRS can demand proof a few years later. Therefore, I’d keep the important receipts and print out a copy of all major bills from the college and a listing of your payments to the college and keep it in a safe place.
You should withdraw 529 funds the same calendar year they are used. For example, don’t withdraw money in December and then pay the tuition bill in January of the next year.
One warning - BB&T bank took over a regional bank and told customers that they will lose access to their past online banking records, unless they are willing to pay the bank a research fee. It is a good idea to keep some paper records, and not rely entirely upon old online records.
You should be fine if you keep your withdrawals at the COA amount listed. Withdrawals can also be used for books, supplies, lab fees, technology (e.g. computers) when required. In the case of tuition, dorms and meal plans we had the 529 plan make payment directly to the university which avoids the IRS issues altogether. We used non-529 funds for other expenses.
I’m not sure if my issue is the same. My daughter is now going to a Comm College, which has no room and board at all. So she’s not technically living “off campus” in the usual sense. So i was wondering if the IRS would consider living at home different from living off campus. That’s where my problem lies. Anyone know?
My D has just moved into an apartment on campus with her friends this year. I am going to withdraw the exact amount on the CoA for R&B for the fall semester this year and the winter semester in January. The money will be sent to me directly. I don’t see any complication. Do I miss anything?
The regs were finally changed and now any student can use 529 money for a computer, software and internet access costs. For a few years, the college had to specifically say a computer was required.
@Charliesch – I did not know that internet access cost was also eligible.
My son’s off-campus apartment requires a 12 month lease even though the students only live there for nine + months. The total of the 12 months’ rent is just below the university’s COA allowance for room. Can I use the 529 account to pay for the full year’s rent?
https://www.fidelity.com/viewpoints/personal-finance/college-529-spending
Excerpt:
"when it comes to room and board, the costs can’t exceed the greater of the following two amounts:
-The allowance for room and board included in the school’s cost of attendance for federal financial aid calculations
-The actual amount charged if the student is living in housing operated by the educational institution"
If your 12 months rent is under the official cost of attendance, I can’t imagine that would be a problem. I think the IRS is mainly concerned about families trying to write off luxury private housing, which is becoming more common near college campuses.
From John Hancock’s website:
"Computers and certain peripheral equipment (such as printers), Internet access,
and computer software (of an educational nature only) are now considered eligible expenses if the items or services are used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible educational institution." Therefore, gaming software, etc. is not eligible.
Also, be sure to check to see whether your state offers 529 tax benefits. For example, my state of PA. allows up to $14,000 per year of contributions to a 529 account to be deducted from income when calculating state income tax.