My high school senior daughter was accepted to the state university, but under a second tier where she can't live on campus the first semester. Many of the students in this program stay in just-off campus rental housing for the fall semester.
I have saved in our state's 529 plan, the gain on the investment can be used tax/penalty free for Qualified Education Expenses (QEEs).
In my situation, I know if my daughter had on-campus housing and meal plan, these are QEEs. Can someone advise if living expenses (rent) just off campus due to school policy preventing living on campus the first semester is a QEE? What about food if not a school meal plan? I want to be able to use my saved 529 funds tax and penalty free, and the school is admitting her on condition she not live on campus the first semester.
Pub 970 to me is not clear on this. However, I have seen articles suggesting that off campus housing and food expenses to attend university are QEEs as long as not exceeding the school's on-campus price quoted for financial aid purposes.
So for example, if the school's on-campus advertised room and board is $9500 for two semesters, and I pay $11000 for an apartment and groceries for my daughter right off campus, I interpret I can withdraw $9500 from the 529 account and it's gain won't be subject to taxes/penalties. However, if I take out $11000, then the gain on the excess $1500 is subject to income tax and a 10% penalty. Correct? Or is none of off-campus living expenses to attend university QEE? In our case we have to abide by an off-campus arrangement because the University is mandating no eligibility for on-campus housing as a condition of admission. She will be considered for on-campus housing in the second semester.
However, most juniors and seniors opt to live just off campus, so the same question applies. I saved for 4 years of room and board in the 529 plan, and want to use this investment tax and penalty free if possible. If off-campus expenses are more expensive than on-campus, I'm willing to cover the difference out of pocket to avoid taxes/penalties on the gain. But I don't even know that any off-campus living expenses are QEE.