Deductions & credits

First, if all of the 529 went to qualified education expenses plus room and board, you can delete the form 1099-Q.

Second, determine how much went to AOTC expenses versus room and board.

Room and board is not a qualified expense for AOTC, but it is a qualified expense for the 529. For full details, see 529 for Room and Board. Did all of it go to room and board? 

• Yes - delete the 1099-Q and concentrate on the AOTC
• No but all of it went to qualified expenses: delete the 1099-Q and subtract the portion paid to qualified expenses from the qualified expenses.
• No - the 529 was bigger than all of the above expenses. The amount beyond room, board, tuition, books, etc is taxable. This is not common and it sounds like you know you have some money paid to qualify for the AOTC.

Example of no- but went to qualified expenses:

• $15,000 529 distribution. $12,000 went to room and board with $3,000 towards tuition, books, etc.
• 1098T shows $12,000 tuition. Plus you have additional expenses of $1,000 for books and miscellaneous.
• The 529 paid $3,000 towards the tuition and books. If we subtract the $3,000 from the amount paid for tuition and books, we have $13,000- $3,000 = $10,000 actually spent out of pocket.
• Any amount over $4,000 for tuition expenses paid out of pocket is extra, not needed for calculating the AOTC.*
• In this case, the 529 does not affect your AOTC. Delete the 1099-Q.

*The AOTC is worth up to $2,500 per student for the first $4,000 you spend on qualifying educational expenses on behalf of you, your spouse, or your dependents.