Retirement tax questions

1. The payment was Jan so it counts in 2025 for payment. The classes beginning in 2025 was fine, if the payment had arrived in  2024.

2. The IRS allows you to claim the money paid the best way for you. Your dollars paid for a lot of things!  The IRS has a great brochure that explains how scholarships and tax credits interact. You get to choose how you claim your dollars are used.

3. We will do some of the math here and the rest in the program. They key is to have a sheet with your taxes so you can explain it later, if you need to.

4. I will get you started. It is not lying to say you used the 529 for room and board, even if the money went directly to the college. That just freed up other dollars to use on room and board. The IRS understands paying the school from the 529 is easy and that kids have to live somewhere.

5. As long as your room and board expenses match up with the school, there is no issue. You will want to keep the rental agreement with your tax records, or some sort of proof - Venmo works for proof.

Let's deal with the issue at hand.

Let's start with the 1099-Q - it can towards room and board first. See 529 for Room and Board. If all of it can be used as room and board, tuck it away. If there is a little left over, subtract it from tuition paid.

Next, more to the scholarship - cover the rest of tuition and necessary /required items. See Qualified Education Expenses - Internal Revenue Service as you may have deductible expenses like a computer or internet -maybe not.

Is all the money used up? Normally it is and nothing is taxable income. If it is not all used up, then the remainder is income to the student and is added to her taxable income.

The hard part, any scholarship income that remains, is considered unearned income for the kiddie tax, see  What is the Kiddie Tax? If the numbers are small enough, you won't need to do anything. But, just in case, that's the last possible hurdle.

This was a lot of information so take it step by step. Best wishes!