TurboTax Community,
Our adult son finished his schooling in 2021, and we wanted to take a final distribution of the unused funds before losing all the earnings at the 10 year anniversay of the Texas Guaranteed Tuition Plan. He is the beneciary, but my wife and I are the purchasers/owners so the payout in 2022 came to us. I mistakenly thought the unused earnings would be taxed as capital gains but looks like it will be other income, plus a 10% tax penalty. His last expenses were in 2021 and prior years. I was wondering if the total of the education credits (Lifetime Learing and American Opportunity Tax Credits) taken over the prior years can somehow be used to reduce the amount of the tax penalty. We also used distributions from a Coverdell ESA to cover some earlier expenses in junior college before dipping into the state QTP.
Thank you in advance
