My 18 y.o. daughter is a high profile athlete and received a full college scholarship which covers tuition, room/board, meal plans and more. I have a 529 account for her which is no use now (she is my youngest) so I'd like to withdraw funds from it and eventually close the 529 account. I have read that I can withdraw up to the scholarship amount per calendar year without having to pay the 10% penalty - is that so? Assuming it is, how will this be reflected on the tax forms? I assume my financial institution will see the withdrawal and send me a tax form? How will they know that the penalty is not applicable?
A separate question, can I still show her as a dependent given she has no income in 2021?
Thanks in advance!
