Two students in college with qualified expenses

[prinehart]

This fall, I will have two students in college with qualified expenses. Will each student's qualified expenses and matching withdrawals be handled separately, or does the IRS lump everything together?
The money will be coming out of two separate accounts - one for son, one for daughter. Expenses for son will only be off campus rent, food and books. I already have documentation of the school's off campus Cost of Attendance amount that I can withdraw. For my daughter, I will have full costs directly billed from the university.

There is so much info out there for saving, but not much info for how to use ESA/529 accounts appropriately.

[dcandmc]

Each student's qualified expenses and matching withdrawals will be handled separately.

Each student will receive a 1098-T from their school, and each account will provide a 1099-Q breaking down the distributions between earnings and basis.

[prinehart]

Thank you.
How do I handle the off campus living expenses? My son's 1098T will show that I paid $0. His scholarships cover his tuition. From what I've read, I can withdraw up to the university's COA for off campus living. I have a document from the university stating off campus COA is $6148 per semester. I figure his rent plus food costs should be around $5800. Does he have to keep every grocery store receipt or can I just use the COA and be under it? I was planning on taking a distribution in August for the entire semester.

[dcandmc]

A 1098-T will only show payments received for expenses that are deemed qualified for education tax credits; this category does not include room and board. I think it's highly unlikely that the IRS would ever ask for grocery store receipts as proof that 529 distributions were actually used for 529 qualified expenses. The general advice I have seen is just make sure that the distributions for room and board do not exceed the qualified room and board expenses as published by the school for the student's particular situation.

[skernan]

With respect to room and board for off campus living, you are able to use the university's COA. Every university's financial aid department should set these costs for purposes of the "cost of attendance" so they can make a determination as to the extent of financial aid needed. As referenced in a footnote of Joseph Hurley's guide, "The amount paid for room and board as QHEE cannot exceed (i) the allowance applicable to the beneficiary for room and board included in the "cost of attendance", as defined in section 472 of the Higher Education Act as in effect on June 7, 2001, as determined by the eligible educational institution for that period, or (ii) if greater, the actual invoice amount the beneficiary residing in housing owned or operated by the eligible educational institution is charged for room and board costs for that period."

[skernan]

With respect to room and board for off campus living, you are able to use the university's COA. Every university's financial aid department should set these costs for purposes of the "cost of attendance" so they can make a determination as to the extent of financial aid needed.