I am a parent and have paid for all of my 25 yo son's 2019 college education expenses . (Despite paying for all of his living and fulltime education expenses, he is no longer a dependent. I have received a $500 Other Dependent credit for him...<sigh>). I claimed all of his education expenses to offset the 529 beneficiary (the 25 yo son) distribution that was paid to me, the account owner. My 25 yo son is filing his tax return, claiming his own exemption. According to TT, "If you claim your own exemption, you can use the amounts paid by your parents to determine an education credit on your own tax return." So my question is....I need to claim the education expenses to offset the 529 distribution, but can my 25 yo son ALSO use the SAME education expenses to claim the education credit (AOTC) on his tax return? Note, I cannot receive an education credit on my return because my income is too high. TIA for clarifying.
No, you can't use the education expenses both to show that the 529 distribution was not taxable and to claim an education credit. Since you have used all of the expenses to offset the 529 plan distribution, he will not be able to claim those same education expenses.
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No you and your son cannot double dip. you cannot both use the same expenses to claim a tax benefit.
But you can split up the expenses to achieve the best over all benefit. Depending on your tax situation, it usually best (for him) to claim the tuition credit first. The American Opportunity Credit (AOC) is 100% of the first $2000 of Tuition and 25% on the next $2000. The AOC is also 40% refundable. The Lifetime Learning Credit is 20% of tuition paid, up to $10K.
$10,000 in educational expenses(including room & board)
-$3000 paid by tax free scholarship
-$4000 used to claim the American Opportunity credit
=$3000 Can be used against the 1099-Q
Box 1 of the 1099-Q is $5000
Box 2 is $600
3000/5000=60% of the earnings are tax free
You have $240 of taxable income (600-360)