When you are living in dorms with a meal plan, the allowances are simple, you can use the 529 to cover living expenses, meal plan and cost of forms. If you move out to private rentals and prepare your own food, I believe you can still use your 529 up to the amount allowed for the university forms and meal plan allowance. Does that sound correct? How is that even verified? My understanding is that 529 spending is done in an honour system. Ie you spend the money and keep the receipts which only ever get checked in an audit situation. For groceries do you need to keep every receipt to show how much was spent? Seems a little onerous and idealistic for a busy/young/absent minded college student.
Paying for food and rent from 529 plan. What are the rules?
byu/Hot-Yak2420 inpersonalfinance
Posted by Hot-Yak2420
4 Comments
You’re mostly right about the room and board limits – you can use up to what the school’s official cost of attendance says for those categories, even if you’re living off-campus
The IRS doesn’t really audit 529s that much but yeah technically you’re supposed to keep receipts. Most people I know just keep a rough running total and save grocery receipts in a shoebox or whatever. It’s not like they’re gonna come after you for using 529 money on ramen instead of textbooks lol
Just don’t go crazy with it and you’ll probably be fine
Up to the published cost of attendance.
It’s only verified if you get audited, then you’d need to provide documentation.
We used the official cost from the university and withdrew that amount each semester. Then all food was paid with kids cash. As much or little as they wanted.
The university will publish an official “cost of attendance”. Just google “xxx university cost of attendance”.
You can withdraw up to that amount. If actual expenses are more, you can’t use the 529 plan for them.
In theory there could be an audit to discover if you spent all that 529 money correctly. In practice I do not believe these audits happen. (Maybe I’m wrong). I kept track of my kid’s expenses by giving them their own credit card and bank account. If I needed to I could verify the expenses.