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I am planning to withdraw the full amount of ‘Cost of attendance’ given by school for a semester from 529 plan.

  1. Can I withdraw money for expenses towards off-campus room and board for a full semester (4 months)?
  2. Do I have to save receipts even if I withdraw amount equal to COA?

2 Answers 2

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I am planning to withdraw the full amount of ‘Cost of attendance’ given by school for a semester from 529 plan.

If you are also wanting to clam the American opportunity Credit which is also in pub 970:

Figuring the Credit

The amount of the American opportunity credit (per eligible student) is the sum of:

  1. 100% of the first $2,000 of qualified education expenses you paid for the eligible student, and

  2. 25% of the next $2,000 of qualified education expenses you paid for that student.

Then the $2,000 or $4,000 must come from non-529 funds. I am assuming there were no scholarships involved.

This credit means that $2,000 that would have gone to the IRS will instead help pay for college. That was something I wasn't aware of until another parent told me about it.

Note there is also a MAGI limit:

Effect of the Amount of Your Income on the Amount of Your Credit

The amount of your American opportunity credit is phased out (gradually reduced) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). You can't claim an American opportunity credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return).

Yes keep all receipts. This is always good advice regarding taxes. Also keeping those receipts can be a big help when double checking the 1098-T and 1099-Q.

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Can I withdraw money for expenses towards off-campus room and board for a full semester (4 months)?

Yes, if you are enrolled as at least half-time student for the course of study you're pursuing (see the IRS Pub. 970).

Do I have to save receipts even if I withdraw amount equal to COA?

You should always save receipts and document everything you're reporting the the IRS. Pub. 970 (see link above) says that ...the expense must be incurred..., i.e.: if audited you might be required to prove that you actually paid for room and board.

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