Can 529 Plans Be Used for Off-Campus Housing?: 1 Minute to Understand 529 Plans for Housing Costs

Yes, 529 plans can be used to cover off-campus housing expenses, but there are important limitations and requirements to keep in mind. According to IRS guidelines, qualified withdrawals from a 529 plan can be used for "room and board" as long as the student is enrolled at least half-time at an eligible educational institution. This room and board allowance includes both on-campus and off-campus housing. However, the amount that can be withdrawn tax-free for off-campus housing cannot exceed the allowance for room and board that the college or university lists in its official cost of attendance figures for financial aid purposes. Receipts or documentation should always be kept to verify actual expenses in case of an IRS audit. As a designer, I always advocate for students and parents to take a holistic approach when planning their living space—balance function, comfort, and financial practicality. If you’re rethinking your off-campus living setup or even your study environment, using smart planning tools like a home designer can help you visualize the layout and optimize your living and study zones for maximum productivity and relaxation.

Tips 1:

Always check your college's published cost of attendance for the specific housing allowance, and keep detailed records of rent, utility bills, and related expenses to ensure all your 529 withdrawals are qualified and well-documented.

FAQ

Q: Can 529 funds be spent on rent for an apartment off-campus?

A: Yes, but only up to the school's published allowance for room and board under its cost of attendance.

Q: Are utilities and internet for off-campus housing covered by 529 plans?

A: Yes, utilities and internet can be included if they are considered part of the room and board expenses up to the college’s cost of attendance allowance.

Q: What happens if I withdraw more for housing than the school’s allowance?

A: Any amount withdrawn above the college’s published allowance for housing will be considered a non-qualified expense and may be subject to taxes and penalties.

Q: Does the student have to be enrolled full-time to use 529 funds for housing?

A: The student must generally be enrolled at least half-time for room and board expenses to qualify.

Q: Do I need to submit receipts or just report the amount?

A: It’s advisable to keep receipts and records of all qualified expenses, in case you need to provide proof to the IRS, though you do not need to submit them with your 529 withdrawal.