I have consulted the IRS tax literature, MESP guidelines, and spoke with representatives for the MESP, individuals from my school's financial aid department, and have not been able to come up with a clear answer regarding what exactly are approved withdrawals from a 529 account. At the minimum, it's articulated that
If a student is living on campus:
- Lowest tier housing provided by college
- Lowest tier dining plan
If not on campus:
- Rent up to the expected cost of housing posted by the university
- Internet (but no other utilities)
- Food[1] up to the cost of the dining plan
And for both:
- Technology required by your major
- And peripherals such as monitor and speakers (but these are the only two things listed)
So, to what extent is the IRS and/or the state of Michigan strict about purchases that aren't explicitly approved?
[1]Like, suppose my child, instead of eating 3 meals a day (which for their college, the approved max cost for which is about 22 dollars a day) ate Cup Ramen for every meal to save money and went to a 10-course omakase for $125 once a week? Is this an approved expense, since it's not over the allowed limit?
Things like a basic desk chair and desk, bed frame, a mattress [albeit of bad quality], and heat/AC, are items included in most standard college dorms (including my child's), and are covered as part of the cost paid to live in that dorm.
My child's current rent is well below the cost of living posted by the college- part of the reason is because it's unfurnished. It makes no sense to me that I can't claim a mattress or a desk or a bed frame, etc. because they chose a 800/mo unfurnished place versus a high-rise that has all these things, but for 1500+/mo.
And, if I bought these things, then where is the line between getting a dorm chair for 30 bucks versus an ergonomic one for 500?
I feel like I could make the argument to an IRS agent that, on average, by the end of the year, if my child doesn't spend over the estimated cost of attendance for the year, and the purchases aren't completely ridiculous, they might think it's ok, but I really have no idea. What authoritative source do I have to consult the answers to these questions?
Thanks for your time.
