Sorry for the follow-ups. I find this very confusing. First, I thought if tax-free scholarships (full tuition) prevented students from having enough qualified expenses to fully use their 529 funds that, so long as the total of non-qualified expenses was less than the tax-free scholarship total, those non-qualified expenses would be exempt from the 10% tax penalty (but not tax on earnings for that NQEE). So if we use 529 funds to pay for furniture/health costs/non-required fees that exceed the approved categories for basic QTRE or Housing COA or Food COA, then we must pay the 10% penalty + tax on earnings both?
The official COA includes transportation, miscel. living expenses, health fee, and other non-allowed 529 expenses, so I'm not sure if that changes things. Much higher (~ $30K) than the Food/Housing COA total I was using.)
Also, my original NQEE total is $2,747. The second $2K scholarship was refunded/used to cover some of our NQ expenses. We did not take an equivalent 529 withdrawal for $2K – like we did for the 1st scholarship. But we took the balance we needed (~$1K) to meet remaining NQ expenses. So that taxable $2K does not increase our 529 QEE or reduce our 529 NQEE? ($2,747 – $2,000 = $747 is incorrect?) It has no effect since we have no more 529-allowed QEE (other than the ~$12K I noted earlier) to allocate it to? (Unless the tax-free scholarship total figures in, but that must reduce our QEE total to avoid double dipping?)
Thanks for breaking it down for me.
