Q - I didn't think you can get a refund with the Lifelong Learning Credit (only the American Opportunity credit allows that)?
A. Correct, unless he completed his BS/BA in 2024 and started grad school, then he may be eligible for the AOC.
Q. Do we need to manually adjust the worksheet for that credit so he is not getting a refund, or does he somehow qualify for this?
A. Sort of . You need to allocate the expenses for the best outcome for the family.
Q - when we do our taxes, how do we account for any of the Lifelong Learning Credit that he receives?
A. Yes. But only to the extent needed. For a $532 LLC, he only needs $2660 of tuition allocated to him (2660 x 20% = 532).
Q. if he doesn't get the full credit, do we need to claim $532 of the 529 plan money as taxable?
A. No, you reduce the amount of tuition you claim/allocate to the 1099-Q by $2660.
Q. if he DOES get the full credit (and gets a refund) do we need to claim $2000 of the 529 plan money as taxable
A. That's unlikely, but again No. You adjust the expenses that gets him that amount. Then TT calculates the amount of the 529 earnings (box 2 of the 1099-Q) that becomes taxable income on your return.
