Hal_Al
Level 15

Education

Q. Should I continue withdraw fund from 529 this way into my account and pay my student's tuition this way going forward, or should let 529 bank pay directly to the school? OR, it doesn't make any difference?

A. it doesn't make much difference. If the 529 Plan Bank distributes the money to the school, the student-beneficiary becomes the recipient, rather than the parent-owner.  If the taxable amount is small, the student probably pays a little less tax, but at some point the "kiddie tax" (student is taxed at parent's marginal rate) kicks in. 

 

Q.  The amount stated on the 1098-T is not exactly the same as on 1099-Q even though all are qualified expenses. Is there anything not included in 1098-T? 

A.  Room and board (even off campus) are qualified expenses for a 529 distribution, but are not included on the 1098-T. Computer and books are also not on the 1098-T.  If the 1098-T and the the 1099-Q are about the same, then you can probably claim the tuition credit  without paying any tax on the 1099-Q.  Room &board, books and computer can be used for the 1099-Q, allowing you to easily claim $4000 of tuition for the American Opportunity Credit