Thank you - she paid her tuition in spring 2026 with her scholarship, and took $2000 less than the remainder from the 529, so paid $2000 out of her savings. She's been taking rent, utilities and gro...
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Thank you - she paid her tuition in spring 2026 with her scholarship, and took $2000 less than the remainder from the 529, so paid $2000 out of her savings. She's been taking rent, utilities and grocery money from the 529. She is not moving back home after graduation, she is staying in her apartment until the lease ends at the end of June, and after that is going to try to go month-to-month (though she may not be able to stay all of August because they'll want a new student in) since she has a summer job in the area until the end of August. After that we'll see if she gets a full time job somewhere, or if she moves back home. But if I understand you correctly, she could claim that $4000 scholarship as income, and pull it from the 529 now (along with the $2000 she spent out of pocket), and still apply the $4000 toward the AOTC? Then if it turns out that she doesn't find a full time job in the fall and moves back in with us, we could claim her as a dependent one last year, get the $500 credit, no one claims the AOTC (so we got it for 2 years out of 4), and her income with only an on-campus job during the spring, the $4000 scholarship, and her summer job will likely be under $18,000 so she will only pay 10% tax on at most half the scholarship? If she does find a full time job and ends up grossing $34,000 or so (including the $4000 scholarship), then she will fall in the 12% bracket, and her tax bill would be $1900 but she would get all of that covered by the nonrefundable and refundable parts of the AOTC? Maybe even get a refund of more than what she had withheld? (I haven't looked at the refundable portion of the AOTC)? Taking more from the 529 for what was paid toward tuition this semester (whether it be her $2000, the $4000 scholarship, or both) would give her a pool of savings to live on while she's waiting for her first few paychecks - especially since we can't pull the entire amount of May rent from the 529 because she's graduating the first weekend in May. Also, I don't know if she's filed 2025 taxes yet - we claimed her as a dependent, and did not claim the AOTC. Can she claim all (or part of, up to the standard deduction when combined with her summer job and on-campus jobs) the $8000 scholarship from 2025 as income and pull it from the 529 now? I know it's best to claim it the year it was awarded, but since Pub 970 doesn't mention it, that would definitely give her more to live on this year.