Yes, but it may (probably) result in some of the distribution from the 529 plan being taxable. The 529 plan will send you a form 1099-Q in January.
Total qualified expenses
(including room & board) less amounts paid by scholarship less amounts used
to claim the Tuition credit equals the amount you can use to claim the earnings
exclusion on the 1099-Q.
Example:
$10,000 in educational expenses(including
room & board)
-$3000 paid by tax free scholarship
-$4000
used to claim the American Opportunity
credit
=$3000 Can be used against the 1099-Q
Box
1
of the 1099-Q is $5000 (Total distribution)
Box
2
is $600 (Earnings)
3000/5000=60% of the
earnings are tax free
60%x600= $360
You have $240 of taxable
income (600-360)
