Thank you - but this doesn't quite match my scenario.
I had approx. $9k in qualified expenses.
I withdrew $9k from 529 plan to pay for these expenses. If I claim all of this as a qualified withdrawal, I do not qualify for the American Opportunity Credit.
I identified that I would be better off if I instead:
- Kept $5k of $9k 529 withdrawal as qualified 529 expenses.
- Treat $4k of $9k 529 as a non-qualified withdrawal (paying taxes and penalty on the gains)
- Apply the remaining $4k of expenses to qualify for the maximum American Opportunity Credit
It looks like this approach will save me about $2,400 in taxes.
As I read the IRS instructions, this seems to be a valid option (they even have a withdrawal code specific to this scenario). However, I can not figure out how to make TurboTax treat the $4k as a non-qualified expense. By default, Turbotax matches up the $9k in 529 withdrawals with $9k in expenses and indicates that I do not have qualifying expenses for the American Opportunity Credit, and therefore zeros it out.
