I (the parent) took the American Opportunity Tax Credit for the four years of college, and was pretty careful not to double-dip. So if dependent student's tuition was about $15,000 per year, I reimbursed myself only $11,000 from the 529. Since four years is all you get for AOTC, I am now looking into the Lifetime Learning Credit. I don't think that the LLC will be of much use to us since tuition is going to be covered by the school. Here's about what I think it will look like:
20,000 tuition
-20,000 "100% tuition coverage, excludes program fees and mandatory registration fees" [they don't actually call it a scholarship]
13,000 room and board
So I believe those program fees and mandatory registration fees could come under the LLC but that's it. All of the room and board would have to come from the 529. For this 529 the parent is the "owner" and the dependent student is the "beneficiary." Does it matter to the IRS whether the 529 distributions get sent to the student or the parent? For instance, I put money in student's checking so he can pay the rent. It is most convenient for me to add up all the rent payments at the end of the year and have the 529 distribute a lump sum to me. Anything wrong with that?
