Education

Probably a poor choice of words.  There is a clause in the 529 code that says if your recipient receives a scholarship, you are allowed to take a non-qualified distribution for that amount from your 529 account without paying a penalty.  You do have to pay taxes on the earnings that are part of the non-qualified portion of the distribution which is what I'm trying to figure.  

In my case, my son received 14K in scholarship money for the year, and I chose to withdraw 7K from his 529 under this clause.  Room, board, books play no part in this.  He has no fees for books, and he lives at home.  And for simplicity I really want to stick to the issue above without bringing the possibility of room/board etc. into it.  Just assume there are no costs at all for that.