Is College Room & Board a Qualified Education Expense?

Is College Room & Board a Qualified Education Expense?
Eileen St. Pierre, The Everyday Financial Planner

We hear on a fairly regular basis how expensive going to college has become. Tuition and fees just seem to keep going up. But many parents don’t realize just how expensive room and board can be. When I went to college, I spent three years in a dorm without air conditioning, in Florida, on the top floor. Today’s living options are a whole lot nicer – and pricier.

dorm roomA common question I get is how to handle funding room and board. When is it considered a qualified education expense? Here’s the answer:

NO

The IRS does not allow you to claim room and board for the American Opportunity Tax Credit or Lifetime Learning Credit. You also cannot claim insurance, medical expenses (student health fees), transportation, and other similar expenses.

  • Instead of claiming one of these credits, you can take the tuition and fees deduction. However, as the name implies, you are not allowed to deduct room and board either.
  • Prepaid Tuition plans do not allow you to use funds to pay for room and board.

YES

529 plans and Coverdell Education Savings Accounts (ESAs) allow you to use account funds for room and board. However, you are limited to the greater of:

  • The allowance for room and board included in the school’s cost of attendance for federal financial aid calculations. You would use this amount if the student lives off campus in private housing.
  • The actual amount charged if the student is living in housing operated by the educational institution (like a college dorm or on-campus housing).

If you are claiming the student loan interest deduction, you are allowed to deduct interest on loans used to pay for the total cost of attending college (including graduate school). This includes room and board, subject to this same limitation.

ESAs also allow you to use funds to pay for K-12 qualified expenses. They are the only educational savings plans that allow this. So if your child needs to attend a special high school where he/she is required to live there, you can use your ESA to pay those housing expenses.

The IRS Tax Benefits for Education Information Center has more information.

Visit my College Planning page for additional resources.