Hal_Al
Level 15

Education

Q.  Is it possible and legal to consider all of the distributions from the 529 account as "non-qualified expenses" and opt to pay the taxes on the earnings of the 529 account rather than reducing the amount of the Lifetime Learning Credit (LLC)?

A. Yes. In fact, it is encouraged.  If the 529 distribution is non qualified because the taxpayer elected to claim a tuition credit, the 10% penalty is waived.