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I did a distribution from my son's 529 plan to cover tuition and room and board.
The distribution was paid directly to me.
I am attempting to complete the American Opportunity Credit.
Total distribution on the 1099-Q is $21,162.00. Earnings of $2,028.90 Basis is $19,133.10.
Tuition is $12,148, room and board $10,694. Other qualified expenses (books/supplies) are $209.
He had a scholarship of $1,500.
The calculation in TurboTax is reducing my adjusted qualified expenses by $10,378 leaving me with adjusted qualified expenses of only $479. Is this correct? Although I'm able to pay the room and board out of the 529 plan it looks like it is affecting my qualified expenses. I have more than enough in tuition costs to cover the $4,000 credit expense cap.
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It looks correct. Qualified expenses for AOTC include tuition and other expenses for books, supplies and equipment the student needs for a course of study.
Room and board is not a qualified expense for AOTC credit. However, it is a qualified 529 expense.
Additional information for the AOTC What expenses qualify for the American Opportunity ...
I’m not sure if my original post was clear enough.
$12,148 tuition
$10,694 room and board
$123 Books and supplies
I consider at least the tuition and books to be eligible for the credit. His scholarship was only $1500.
My qualified expenses are being reduced by the room and board which is an allowable expense for a 529 distribution. I do understand that it’s disallowed for calculating the credit. The software is allowing the tuition and books, however why is it reducing that amount by $10,000+ (Which I’m assuming is the room and board)?
Isn’t the $12,000+ in tuition fully eligible? My basis was $19,000+ . The $479 final qualified expenses makes no sense to me.
Yes, you can allocate expenses, scholarships and distributions.
If you continue through the Education Section Interview, you will come to a screen that says "Maximize My Education Tax Break"
When you click that, the program does just that, allocate to give you the best bottom line.
Below is a link to how the IRS discusses just this subject:
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