Does this work if the earnings are relatively high? and also the tuition is high? What if the first number in your example was 20,000, and the scholarship was much smaller, so even after subtracting the scholarship and the 4,000 for AO Credit, you still have 15,000. Which is roughly twice the earnings. Does that mean none of it is taxable? Does it mean the student does not have to file a return if they do not meet other income limits? Even if the parents claim the $4000 spent (closer to $1500 actual). Having trouble following your example because my numbers are kind of upside-down.
If tuition and housing were paid from two separate 529s, and ALL of the one spent on room/board went to room/board. Should I just run the calculation on the 529 that went to tuition?
Lets say 12,000 for qualified tuition after scholarship. - 4000 for the credit, I still end up with a figure (~8000) which is larger than the earnings (~6000). Does it cancel out? or does it mean a higher tax?
