Q. Am I correct that if I DON'T count the $25,000 as tax-free scholarship funding on my claim, I DO have to have my daughter count the $25,000 as taxable income on her claim?
A. Yes. But you can do some of each.
Q. Is it permissible to include some food costs while she was at home, for the 529 distribution?
A. Yes. You can use the lower of your actual costs or the school's meal allowance.
Q. Is there a "correct" way to enter the $25,000 scholarship as taxable?
A. No, but there is a usual way. You will be asked how much of the scholarship was used for room and board. Enter there the amount you want to be taxable. That won't prevent you from saying the 529 distribution paid for R&B. It's just an entry technique (you'll see the results on the work sheet. It puts it on Line 2c (amount required to be used for other than qualified expenses). If you use desktop (not online) TT, there's another way to enter it.
