Wow, thank you SO MUCH for your responses. To simply this a bit, my employment income is too high for taking tuition credit or American Opportunity credit so I don't need to worry about that. However, I had no idea that:
- The scholarship is a taxable income. Will I receive a tax form for that from her college?
- Part of the income could be allocated to her (for the obvious reason she has never filed a tax return).
Given we may decide to experiment with two tax returns (hers in addition to mine), does it matter who the distribution goes to? Obviously, the easiest way for me to just send money to my personal bank account and figure out the rest later, but maybe it needs to go to her right away to be able to show this as her income?
Last question for now: how do I determine how much I can withdraw from 529 account? Here are some rough numbers:
Full cost of her attending this college is $75,000
Her scholarship is $81,000
She started as a freshman in August'21
How much can I withdraw in 2021 without incurring a penalty? I assume it is not the entire $81K because her scholarship is for the entire 21/22 school year?
I've always done my taxes myself, but sounds like I may need an accountant this year... Still would like to understand fundamentals here before I hire someone. Thanks again for your help!
