I think I'm overcomplicating this. Of the $25,000 529 distribution we got to match our son's scholarship money, I understand we only have to taxes on income earned (no 10% penalty). Does it matter how we allocate the $25K withdrawal we got (qualified vs non-qualified expenses)?
What's the benefit of declaring part of the scholarship money as earned income? Can we still declare scholarship money we got a 529 withdrawal match as our son's earned income?
My wife and I are making too much to qualify for AOTC. My son is a full-time student who received about $2500 from his summer job, so I don't think he'll qualify as well.
