@PSUDAD said "my daughter is under income thresholds so doesn't need to file".
The income threshold depends on the source of her income. Your dependent child must file a tax return for 2021 if he had any of the following:
- Total income (wages, salaries, taxable scholarship etc.) of more than $12,550 (2021).
- Unearned income (interest, dividends, capital gains, unemployment, taxable portion of 529 distribution) of more than $1100.
- Unearned income over $350 and gross income of more than $1100
- Household employee income (e.g. baby sitting, lawn mowing) over $2300 ($12,550 if under age 18)
- Other self employment income over $432, including money on a form 1099-NEC
Q. I read that I can't double dip on the 529 exemption and the AOTC. How do I avoid the double dip?
A. You avoid the double dip by making adjustments in what you claim, when you enter the 1099-Q and educational expenses on your dependent's return. There is actually a screen that asks how much was used by the parents (or some such wording) in the dependent's interview. TurboTax usually prepopulates that screen with $4000 (the amount needed to get the maximum AOTC).
You can still claim the AOTC, this year, by having your dependent pay a little tax on the 1099-Q, or better yet, her scholarship, if she has any. Depending on the numbers, she may not have to pay any tax or even have to file. You say her 1098-T and 1099-Q canceled out to the dollar. The 1098-T does not include room&board and usually not books and computers. You probably have enough total expenses for the AOTC and a tax fee 529 distribution.
