In 2021 I withdrew from the 529 and received a grant through the 529 from NJ Best for my son's college tuition and books. Turbotax allocated $4000 from the education expenses for the American Opportunity Credit which resulted in some of the withdrawal being taxed. I ran the different options in Turbotax and this was better than if the whole 529 was tax exempt. Since I did this for federal do I have to allocate the same for the New Jersey return? For the New Jersey return I do not have to consider the AOC so would not have to declare any of the 529 earnings but it will differ from federal. Do New Jersey state and federal have to be the same for the 529 withdrawal?
