Apologies if this has been discussed on this forum in the past - searched and couldn't find anything.

We recently bought a house in our personal names for our son to live in while he's at Aggieland over the next few years. Plan is to have his roommates essentially cover our mortgage (and then some in this case), but wouldn't mind charging my son rent to tap into his overfunded 529. I know that if I charged him anything and wanted to access 529 funds, then I would need to charge market rent - that's fine. What I'm unsure about is whether or not the 529 administrator can cut a check directly to me as the Landlord or should I create an LLC to serve as Property Manager and layer that in?

Or should I transfer the ownership in the house to a newly created LLC and approach it that way?

Any tips, guidance, or advice would be greatly appreciated. I don't have a great CPA, but happy to pay one for this topic if someone can provide a good recommendation (San Antonio preferably). Thanks!

I am not a CPA but google says you can use housing as a college expense, do you need to risk due on sale from your mortgage company by transferring the deed into your LLC? Probably not

It is cleaner to leave housing out of the equation unless it's paid via the university fee statement…

You can only deduct her portion and if her roommates are covering the whole mortgage I think I'm
missing something

Yes you can. Probably best to not be directly to you, but an LLC, should suffice.

I used a reputable National Tax Service HR B....and always made withdrawals from my 529 equal to TAMU Finance department figures for average cost of room and board at TAMU for my daughter(s) and that was the way the taxes worked for me (no income tax due on those withdrawals). I had roommates pay me directly for rent on their rooms and reported that as income, which was enough to cover mortgage expense so net taxable was $0 effectively with depreciation on the house and maintenance expenses.

If you plan to keep the house as a rental unit after your son graduates and continue renting it out, I'd definitely do an LLC.

I don't know if you need or should do an LLC or not.

But either way you are eligible to withdraw whatever the max on campus housing cost is at the institution in which your son is enrolled. At A&M this may be something like a solo room at the hullabaloo dorm. Whatever that costs per yr is the max you can charge in rent and withdraw from his 529.

Just take the money out that you need and have it deposited in your checking account. As long as you can show it was for housing, nobody will care. You don't need to set up companies, play shell games, sacrifice chickens, or any of that crap. On top of that, I don't think they care if you don't take out excessive amounts. Remember, it costs $75,000/year to go to a top private college. IRS ain't gonna be quibbling over your paltry $33K withdrawal for a year at State U.

AggieMD95 said:

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I don't know if you need or should do an LLC or not.

But either way you are eligible to withdraw whatever the max on campus housing cost is at the institution in which your son is enrolled. At A&M this may be something like a solo room at the hullabaloo dorm. Whatever that costs per yr is the max you can charge in rent and withdraw from his 529.

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Yep. Just find the most expensive dorm and the most expensive meal plan. You can withdraw both.

Thanks to all for the answers and thoughts - very helpful

Sorry to hijack, but since we are on the topic:

Anyone know what the max amount allowed for Fall Semester for housing?

My daughter is starting school, living at Rev, and I'm pretty sure I can't withdraw the entire amount of her rent because it's too high, but obviously want to take the max allowed.

found this on the "Saving for College" blog

Quote:

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Additionally, off-campus students are limited to the allowance reported by the college in its "cost of attendance" figures. Any amount above the allowance is considered a non-qualified 529 plan expense.

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https://www.savingforcollege.com/article/what-you-can-pay-for-with-a-529-plan

Looks like $5538 for housing for Fall 2024 per this:


https://tuition.tamu.edu/undergraduate

saw that. Seems odd that they have a higher threshold for on-campus than off.

Seems like many off campus options would be the same or higher.

Guess they factor in folks that are living in 2 or 3 BR rentals with friends.

Single suite in Hullabaloo is $6500/semester.

Comeby! said:

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Single suite in Hullabaloo is $6500/semester.

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Okay...I've read you can use that figure, and I've read that you have to use the COA....seems the COA would be the answer, that that Hullabaloo number would be better. Rev with parking is about $1300 per month for her in a 4x4 unit.

I don't know what you can or can't use but that's what hit my daughter's account. $6501 actually. I paid it direct to the university with a 529. So that's a data point. That includes all utilities, so keep that in mind.