I own a 529 plan for my child (beneficiary)and have never withdrawn scholarship money - it is a lottery funded scholarship and does not meet or exceed the amount of qualified expenses. The scholarship is reported from the school on a 1098T. The 529 will end up over funded, so I would like to withdraw as much as possible without the penalty. If I withdraw the scholarship money received for 2019,I have a question about reporting. We have always calculated the college costs/529 income on the parent return (always zero taxable income as our withdrawals equal our qualified expenses). If we withdraw the scholarship money, would that then need to be reported on my child’s return and would the 529 withdrawal for this need to be in her name? All prior amounts received from the 529 have been in the parents name. She will only have Schedule C income this year. If anything would need to be reported on her return, I was confused how this is handled when we would be splitting the 1098T reporting - the scholarship reporting showing on her return and the tuition expenses netting with the other 529 withdrawals for zero taxable income on the parent return. OR can we have the scholarship withdrawal also come to the parents and be reported on the parent return and reflected as the scholarship exception? I don’t want to cause any problems/additional expense for my daughter from a tax perspective.
Thank you.
