For a 529 plan, room and board limits are set by the school, not the IRS: you can withdraw tax-free up to the greater of the room and board allowance in your school’s published cost of attendance (COA) or, if your student lives in school-owned housing, what the school actually charges. Off-campus students are held to the COA figure. Spend more than that and the earnings portion of the excess gets hit with income tax and a 10% penalty.1Office of the Law Revision Counsel. 26 USC 529 Qualified Tuition Programs
Where the Cap Comes From
The tax code caps qualified room and board at the greater of two numbers: the room and board allowance the school includes in its COA for federal financial aid purposes, or the actual amount the school charges a student living in school-owned or school-operated housing. IRS Publication 970 uses the same “greater of” language.2Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
Those two numbers are usually close, because schools use their own housing costs when setting the COA. The difference matters when they diverge. If a school charges $13,000 for a dorm and meal plan but lists only $11,500 as its COA allowance, a student in that dorm can use the full $13,000. An off-campus student at the same school is capped at $11,500.
The COA allowance is not something you look up on an IRS chart. Each school sets its own, and it varies by term, enrollment status, and living arrangement. Get the figure from the financial aid office, and ask specifically for the one that matches your student’s situation.
On-Campus vs. Off-Campus
On-campus students rarely have a problem. Whatever the school bills for the dorm and meal plan is almost always qualified, because the actual invoice is one of the two figures used to set the limit. The exception would be an upgrade to premium housing that outruns both the COA and the standard on-campus charge, which is unusual.
Off-campus students run into the harder ceiling. There is no school invoice for an apartment lease, so the cap defaults to the COA allowance for students in that living arrangement. Say the school lists $12,000 for off-campus room and board and your student pays $1,400 a month in rent plus $300 in groceries. That comes to $17,000 for the year, but only $12,000 qualifies. The other $5,000 in withdrawals is non-qualified.
The allowance is a bundled figure covering both housing and food. There’s no separate room cap and board cap, so you have some flexibility in how the money splits between rent and groceries as long as the combined total stays within the allowance.
What Counts Toward the Cap
The “room” side covers the cost of having a place to live during enrollment. For off-campus students, that’s rent plus basic utilities: electricity, water, heat, gas. The “board” side is food, whether a school meal plan or groceries.
A few situations cause confusion:
- Fraternity and sorority housing. If your student lives in a chapter house, the housing portion of what they pay can qualify, subject to the school’s COA cap. Dues and social fees don’t qualify. Keep housing charges separate from membership costs.
- Study abroad. Room and board at a foreign institution can qualify, but only if the school participates in federal student aid programs. You can verify this through the Department of Education’s federal school code lookup. The same COA-based cap applies.2Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
- Summer housing. Summer room and board can qualify if the student is enrolled at least half-time during that session. Housing during breaks when the student isn’t enrolled doesn’t.
What Doesn’t Count, Even Within the Cap
Several housing-related costs are excluded no matter how much room is left under the allowance:
- Security deposits. A refundable deposit isn’t a housing cost.
- Furniture and household items. A couch, a desk, kitchen supplies for the apartment: not covered.
- Cable and streaming services. Entertainment subscriptions aren’t housing or food.
- Transportation. Commuting, parking, and gas are out, even when a student lives off-campus because of where the school is.
A common mistake is assuming any reasonable living expense counts as long as you have receipts. It’s the cap that governs, and the nature of the expense has to fit within it.
Half-Time Enrollment Is Required
Room and board only qualifies when the student is enrolled at least half-time. The IRS defines half-time as at least half of the full-time workload for the student’s course of study, using the school’s own standard.2Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education That’s typically half the credits required for full-time status in a given term.
This rule is specific to room and board. Tuition, fees, books, supplies, and required computer equipment qualify at any enrollment level. But drop below half-time for a term, even briefly, and any 529 withdrawals for housing or food during that stretch become non-qualified.
If You Go Over the Cap
When distributions exceed qualified expenses, the earnings portion of the excess is included in the recipient’s gross income at ordinary rates, plus a 10% additional tax on those earnings.1Office of the Law Revision Counsel. 26 USC 529 Qualified Tuition Programs Your original contributions come out tax-free because they were made with after-tax dollars. Only the earnings portion is taxed and penalized.
The 10% penalty is waived in a few situations: the beneficiary receives a tax-free scholarship (up to the scholarship amount), attends a U.S. military academy, dies, or becomes disabled. Income tax on the earnings still applies; only the extra 10% goes away.
State Tax Recapture
Many states that offer a deduction or credit for 529 contributions will recapture that benefit on a non-qualified distribution. Rules vary. Some states add previously deducted contributions back to state taxable income. Others impose their own penalty on top of the federal 10%. California uses a 2.5% state penalty in place of the federal figure. Check your own state’s treatment before assuming the federal cost is the only cost.
Mid-Year Refunds
If your student gets a refund of tuition or room and board partway through the year, say from dropping a class or moving out of a dorm, that refund can turn an earlier qualified withdrawal into a non-qualified one. You can fix it by recontributing the refunded amount to any 529 account for the same beneficiary within 60 days of getting the refund.3Internal Revenue Service. Publication 5834 – Qualified Tuition Programs Miss the 60 days and the earnings portion of that original withdrawal becomes taxable.
Timing matters at year-end too. The distribution and the expense it covers should fall in the same tax year. A December withdrawal that pays a January bill can create a mismatch.
Records That Prove You Stayed Under the Cap
Your plan administrator sends Form 1099-Q reporting the year’s total distribution and its earnings and contribution portions.4Internal Revenue Service. Instructions for Form 1099-Q Receiving that form doesn’t mean the withdrawal is taxable. It’s just a report. The burden is on you to show the money went to qualified expenses within the limit.
For room and board, keep:
- COA documentation. A letter or printout from the financial aid office showing the room and board allowance for the relevant term and living arrangement. This is the most important document, because it sets the cap.
- Lease agreements for off-campus students, showing monthly rent.
- Rent and utility payment records: bank statements, canceled checks, or utility bills.
- Grocery receipts or credit card statements covering food during enrolled periods. You don’t need every receipt, but enough to show reasonable spending.
You don’t submit these with your return. But if the IRS questions the distribution, the COA letter and payment records are what close the file quickly. Most advisors suggest keeping 529 records for at least three years after filing, which matches the standard audit window.
K-12 Schools Aren’t Included
Since 2018, 529 plans can cover up to $10,000 per year in tuition at elementary and secondary schools.5Internal Revenue Service. 529 Plans – Questions and Answers That allowance is tuition only. Room and board is not a qualified 529 expense at the K-12 level, including at boarding schools. The rules described here apply only to postsecondary education at eligible colleges, universities, and vocational schools.