Education

Thank you very much for your informative reply!  I do really appreciate it!  I've done some more research, and with some guidance from your reply (and Carl's below), I think I have a clearer picture of how to "optimize" my savings and use of them for DS' education.  I see this "optimization" in the following steps:

1.) FLORIDA PRE-PAID.  I did some more research into my Florida Prepaid plan - and re-discovered a benefit long forgotten that changes some things.  Specifically, because I purchased my Prepaid plan before 2007, the year the state of Florida instituted an additional "Differential Tuition", I am exempt from this differential tuition. This amounts to ~$662 of additional tuition (per 15 credit semester) that I am exempt from paying when my Prepaid plan is used against tuition.  I knew this back in ~2007 time frame, but it was long forgotten, and appears nowhere on my current bill... but it is a significant benefit for me in using the Prepaid considering I paid ~$2940 for 30 credits which currently cost $4837 (when "Differential Tuition" is included).  I did a little side-by-side comparison of using the Prepaid vs. using out of pocket (OOP) funds and claiming AOTC.  For ~30 credit year (2 15 credit semesters), I get about $940 more value if I use the Prepaid vs OOP. 

2.) FEES/BOOKS OOP.  Additionally, I have also learned a little "trick" by which I can use OOP (taxed) funds to pay for the remainder of Fees & Books (after Tuition) by depositing this OOP money PRIOR to the Bright Futures Scholarship being applied to my son's account (usually a month after semester starts). I understand that the OOP funds used toward Fees&Books can then be claimed for some AOTC (I missed this opportunity for his 1st Fall semester and the Scholarship paid for all these remaining fees; this was ~$880 that could have been paid OOP and qualify for AOTC. Oh well, live and learn - I will get it for the remaining years.) 

3.) ROOM w/ 529. After Tuition, Fees, Books are all paid for, there is still "Room" which for the Spring 2021 (at least) will be on campus and thus is billed via the Bursar.  I can also pay this OOP - "Room" does not qualify for AOTC, and will not be claimed as such, but I can withdraw from his 529 account tax free in the same calendar year to reimburse myself. 

QUESTION1: Should the withdrawal be directed to my DS (the "beneficiary) and then does the resulting 1099-Q from this withdrawal get reported on DS' tax return?

For Future semesters after next Spring, he may very well be Off-campus, and thus, I believe I can take 529 withdrawals, equal to the "ROOM" cost on-campus, for the semesters that he is enrolled at least 1/2 time, to reimburse the OOP expense of Room.

 4.) SCHOLARSHIP.  After DS' account has tuition, fees, books, and ROOM covered by the above (should clear his account to $0 balance for the semester), his Bright Futures Scholarship will hit his account. I need to check with the Bursar, but I believe after his semester bills have been paid, any remaining money (his scholarship) can be withdrawn to his personal account.  This is then taxable money and DS will have to claim it as income on his return.  Since DS does not yet have any additional reportable income, his total income including the scholarship will likely be less than the threshold noted ($12.2k/year?)  Although he would not be required to file a return, he still should do so in order to show the scholarship being claimed as taxable to him and supporting my taking the AOTC for the amount I pay OOP for FEES/BOOKS. 

I think DS and I will have an arrangement that the Scholarship money will be used to "leap frog" payments for each successive semester - for example, Spring 2021 scholarship money will sit in his account and then be used to "pre-fund" his Fall 2021 semester as OOP money and this can carry forward each semester. 

QUESTION2: Is it important from whose account the OOP money comes from, if the parent claims AOTC and the student receives scholarship and 529 funds (as the beneficiary)? 

5.) "BOARD/FOOD" Finally, as we have not purchased a meal plan, even though my DS is on-campus as he pays for restaurants/groceries as he goes, I can withdraw from his 529 account up to the amount of the cost of a meal plan (assume the 7-day plan; he eats more like 11 days in that time... lol) as long as he is actively enrolled at least 1/2 time that semester, all during the same calendar year.  This will be the same if he goes off-campus in the future.  He will incur food charges (paid w/ cash and credit card) and we can withdraw 529 funds to pay us back during the same calendar year. Board/food does not qualify for AOTC and will not be claimed as such. 

QUESTION3: as above, if this 529 "reimbursement" goes directly to DS "beneficiary", does the 1099Q go on his tax return; do I make any note of it on my return?  

QUESTION4: the question of receipts for off-campus food expenditures appears all over internet forums.  There are "authoritative voices" on both sides of that one.  I think you have to be able to show that you "incurred" that expense, but looking at Pub. 970 it appears that as long as you're below the amount of "BOARD" for the on-campus / cost-of-attendance meal plan cost, this amount is qualified as long as you're enrolled >1/2 time and withdraw taken in same calendar year as the claimed expense. It does not mention receipts;  I am pushing son to try to keep as many as he can though it is clear that we won't account for 100% of his food spending.  Are receipts necessary?

Thanks again for your kind assistance and I would certainly appreciate any correction of the above think or response to my 4 additional questions.  Thank you.