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American Opportunity Tax Credit AOTC and 529
I used a 529 distribution to pay my daughters Fall 2019 college tuition. She received a 1099-Q for the distribution with stated 'Box 2' interest earnings. Can I claim $4000 of the tuition on my return to receive the full American Opportunity Tax Credit (AOTC) and shift the remaining qualified tuition expenditure to her return to reduce the taxable earnings portion on the 529 distribution? I otherwise qualify for the AOTC. I've researched this and this is what I came up with to avoid the 'no double dipping' rule. For specifics, net tuition after school provided direct scholarships was $7590. That is the amount my daughter received from the 529 on the 1099-Q. The Box 2 interest earnings were 4618.33. So if I use $4000 of that qualified $7590 tuition on my return to claim the full $2500 AOTC credit, that would leave $3590 that my daughter could put on her return as qualified tuition to offset the 529 earnings. Since taxes for her would only be on the earnings portion (the $4818.33 Box 2 amount), that would leave her with (4618.33 -3590 =$1028.33) exposed / non-sheltered income. I'm guessing the tax on that is capital gains of 15% ($1028.33 X 15% = $154.25) ...which is still far less than the amount I'd be giving up by foregoing the tax credit (25% on the second $2000 of qualified tuition). Is this a correct assessment of this situation? Can I so split the qualified tuition paid via 529 across mine and my daughters returns so I still get the AOTC and shelter part of the 1099-Q earnings on her return? Thanks!