What Is Room and Board Considered for Tax Purposes?

The term “room and board” refers to the combination of lodging and meals. While the concept is simple, its financial and tax implications shift significantly depending on the context. The specific services included and how they are paid for determine how these costs are treated for financial planning and tax reporting.

Core Components of Room and Board

The “room” component of this term refers to the lodging provided to an individual. In a university setting, this is a dormitory room or an on-campus apartment. The cost of the room often bundles in utilities such as electricity, water, and internet access, along with maintenance and security services. The price can vary based on factors like the type of residence hall and whether the room is a single or shared space.

The “board” portion covers the meals provided to an individual. For college students, this is most commonly structured as a meal plan, which grants access to on-campus dining halls. These plans can offer a set number of meals per week or provide unlimited access, and some institutions also offer “dining dollars” for use at various campus cafes and food vendors.

Inclusion in College Cost of Attendance

Room and board is a significant component of a college’s official Cost of Attendance (COA). The COA is an estimated figure that includes tuition and fees, plus allowances for housing, food, books, transportation, and personal expenses. This budget is established by the financial aid office and serves as a baseline for determining a student’s financial aid eligibility.

The way room and board is calculated within the COA differs based on the student’s living situation. For students living on campus, the figure is a direct charge based on the specific dormitory and meal plan they select. For those living off-campus or commuting, the university develops an estimated allowance for rent, utilities, and food based on reasonable local costs.

This COA figure is a central element in the financial aid calculation. Federal guidelines use a formula: Cost of Attendance minus the Student Aid Index (SAI) equals the student’s demonstrated financial need. The SAI, which replaced the term Expected Family Contribution (EFC) beginning with the 2024–2025 award year, is determined from the Free Application for Federal Student Aid (FAFSA). The resulting financial need figure determines the maximum amount of need-based aid a student can receive.

Taxability of Room and Board

From a student’s perspective, the tax treatment of room and board hinges on the source of the funds used to pay for it. Scholarship and grant money used to pay for qualified education expenses, such as tuition and mandatory fees, is not considered taxable income. Any portion of a scholarship, fellowship, or grant that is used to cover non-qualified expenses, including room and board, is taxable and must be reported as income on the student’s tax return.

For employees, the value of lodging provided by an employer is considered a taxable fringe benefit and must be included in their gross income. An exception exists for lodging provided for the “convenience of the employer.” For the value of the lodging to be excluded from an employee’s income, three conditions must be met:

• The lodging must be on the employer’s business premises.
• It must be furnished for the employer’s convenience.
• The employee must be required to accept it as a condition of employment.

The “condition of employment” test requires that the employee must accept the lodging to properly perform their job duties. This often applies in situations where an employee needs to be available for duty at all times, such as a resident advisor in a dormitory, a live-in nanny, or a property caretaker. If these three tests are met, the value of the housing is not considered taxable income for the employee.