Hal_Al
Level 15

Education

Q.  Employer assistance of 10k ($5250 tax free). In order to avoid double dipping do I take 30k-10k or 30k - 5250 tax portion? 

A.  Simple answer: $24,750 (30k - 5250 tax free portion).

 

But, if you are going also  to claim a tuition credit or deduction, you need to adjust for that too. For example, if you want to claim the maximum American Opportunity Credit* (the most generous credit), you will need $4000 of qualifying expenses.  So, you would only take a $20,750 distribution from the 529 plan (30,000 - 5250 - 4000 = $20750). 

 

*Graduate school is not eligible for the American Opportunity Credit.  You would want to claim the Lifetime Learning Credit (LLC).  It takes $10K of expenses for the maximum LLC.  You would only withdraw  $14,750 from your 529 (30K - 10K - $5250 = 14,750).