Suppose I get a scholarship for my full tuition. I thought I was allowed to take the cost of tuition out of the 529 as a taxable distribution (without penalty). Is that not possible in this case? That is, the distribution from the 529 doesn't have to be allocated to an actual expense, it can be balanced with the scholarship instead. Do I misunderstand? Then my accounting looks like this:
Total expenses $13400
AOTC $2150
scholarship $2000
529 tuition and room and board payment (tax free) $9250
529 scholarship withdrawal amount ($2000) taxable
The 529 withdrawal is exactly $2000 too much, which is accounted for by the scholarship.
My daughter lived at home for part of the semester (semester started on time, but housing opened late). Is there some standard way for me to estimate the costs of her living at home for tax purposes? It was about a month.
