Room & Board

If a student did not attend at least 1/2 time, the 529 plan distribution cannot be used for R&B. If the student was full time in the Fall semester until November when they had to withdraw due to illness.......can they take the prorated R&B the school charged? The 1098-T did not have the half time box checked.

Bringing this back to the top. Not sure if I can take this Room and Board. The 1098-T's do not have the box checked for half time. The parent told me that his daughter had to withdraw in mid November due to illness, but was full time for the Fall term up till this time. This is her freshman year. Thoughts?

Section 529(e)(3)(B) allows room and board to be considered in the case of an individual who is an eligible student, as defined in section 25A(b)(3), for any academic period.

Section 25A(b)(3) provides, in relevant part:

[T]he term “eligible student” means, with respect to any academic period, a student who [...] is carrying at least ½ the normal full-time work load for the course of study the student is pursuing.

The instructions for Form 1098-T say the following:

Check this box if the student was at least a half-time student during any academic period that began in 2019. A half-time student is a student enrolled for at least half the full-time academic workload for the course of study the student is pursuing.

Note the parallels between the Code and the instructions. Also note that the student needs to be an eligible student "for any academic period". For purposes of section 25A, this term is defined as "a quarter, semester, trimester, or other period of study as reasonably determined by an eligible educational institution" (Regs. 1.25A-2(c)).

Section 529 does not define the term "academic period". So to answer your question, we need to know whether there is a way to 1) consider someone an "eligible student" under the section 25A definition when there is less than a full academic period involved, and at the same time, 2) consider the term "academic period" under section 529 to have a different meaning than the section 25A definition.

The conference report for the Taxpayer Relief Act of 1997 states that the 529 room and board expenses apply "for any period during which the student is at least a half-time student". The word "academic" is missing. In contrast, the word is present for explanations of the HOPE scholarship credit, and they also explain that a student must be half-time "for at least one academic period" in that section of the report. Is this difference enough to support a conclusion that a different definition applies to section 529?

The academic period was August 21 thru Dec. 17th. She had to drop out mid November due to illness. The college prorated the R&B and tuition under these circumstances. The code and the instructions refer to at least 1/2 time for a full academic period. Student was full time up till mid November. No where is there an exception due to illness. I am not sure what to do. If I can't use the R&B.......it will cost 850 in tax for the parent who took the distribution in his name.

The code and the instructions refer to at least 1/2 time for a full academic period.. Not exactly. See below.

As Chay tells us, 529 points us to 25A(b)(3). Let's parse 25A(b)(3).

(3) Eligible student For purposes of this subsection, the term “eligible student” means, with respect to any academic period, a student who—
(A) meets the requirements of section 484(a)(1) of the Higher Education Act of 1965 (20 U.S.C. 1091(a)(1)), as in effect on the date of the enactment of this section, and
(B) is carrying at least ½ the normal full-time work load for the course of study the student is pursuing.

. And the relevant reg. for that says

(ii) Work load requirement. For at least one academic period that begins during the taxable year, the student enrolls for at least one-half of the normal full-time work load for the course of study the student is pursuing.

Here's the relevant wording from 20 USC 1091

(a) In general In order to receive any grant, loan, or work assistance under this subchapter, a student must— (1) be enrolled or accepted for enrollment in a degree, certificate, or other program ...

So if the student only needs to be enrolled or accepted for enrollment, I think the only effect of the student's withdrawal is from any refund the student may have received, not a nullifying of the student's eligibility. And during the student's enrollment, the student carried at least 1/2 the normal full-time load, etc.

And during the student's enrollment, the student carried at least 1/2 the normal full-time load, etc.

But did the student carry at least 1/2 the normal full-time load "with respect to any academic period"?

Substituting the OP's facts, we would ask whether the student carried at least 1/2 the normal full-time load with respect to August 21st through Dec. 17th. Does it count as "carrying a course load with respect to" that period if the courses are withdrawn from in November?

And if we answer yes and deem the student to be an eligible student, we still have to show that she was "an eligible student for any academic period" under section 529(e)(3)(B). Again using the substitution, we would ask if she was an eligible student for August 21st through Dec. 17th - that is unless you want to go with my theory that the definition of "academic period" here can refer to an interim period.

You two are way smarter than I. I think I will rely on the Sec. 529 instructions that do not define what an academic period is and thereby allow the distribution to be used for room & board. I will, of course let my client know that it may not fly. It would seem like there would be an exception for a student that must drop out due to illness. Big time Thank you for all of this well researched information.