Q. If I include $2793 grant scholarship in student gross income, then, can I get $4k expenses to claim AOTC?
A. Yes. That's exactly how the scholarship as income loophole works.
Q. Is my 529 AQEE still 8433?
A. Yes.
Q. Or will be reduced to 8433-2793=5640?
A. No. The tax free scholarship amount of $2793 shifted to taxable scholarship. $2793 of expenses shifted (from being allocated to tax free scholarship) to the AOTC. Nothing happened to change the 529 AQEE.
AOTC - American Opportunity Tax (Tuition) Credit
AQEE - Adjusted Qualified Educational Expenses
