1099-Q / 1098T can dependent claim?

Dependent daughter college student full time for 5 months then part time 2nd semester, always  living at home. She grossed approx $13K income.   1098-T has tuition of $2700 & scholarship of $1130.  Also received 1099-Q with gross distribution of $2600, & earnings of $520. Can I claim the 1098-T & she claim the $1130? Or do I need to claim both? I am claiming her as a dependent.
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My daughter will claim the 1099-Q which is the Florida Prepaid QTP.
Ans. Yes, assuming she was the recipient, as is usually the case

I can claim the 1098-T even thought it has her name & SS#, because she's my dependent.
Ans. Yes

Please clarify this sentence.. Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion
Ans. From what you describe, you are allowed to use the entire $3300 ($2700 + $600 for books) to claim the American Opportunity Credit of $2325 (this assumes you have a tax liability to offset)

We spent 600 on books. can it be deducted from the scholarship $ on her tax return or do I claim it on mine along with the American Opportunity credit?
Ans. yes, See above

the QTP paid for tuition
Ans. Even so, you are not required to apply it to it tuition, on your tax return. Instead, you may use it to  claim the American Opportunity Credit. But, that means that the entire $520 QTP earnings and $1130 scholarship will be taxable on your daughters return. Assuming a 15% tax rate for her, that is only $248 in tax, for her, compared to the $2325 you save with the American Opportunity Credit
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    Yes, so long as the school did not apply the $1130 directly to tuition. In which case you claim only $1570, but she doesn't have to claim any scholarship income.

    As for the 1099-Q;  For 529 plans, there is an owner (usually the parent), and a beneficiary (usually the student dependent). The "recipient" of the 1099-Q can be either the owner or the beneficiary depending on where the money was sent. When the money goes directly from the QTP to the school, the student is the "recipient".
    The 1099-Q gets reported on the recipient's return. The recipient's name & SSN will be on the 1099-Q.
    Even though the 1099-Q is going on the student's return, the 1098-T should go on the parent's return, so you can claim the education credit. You can do this because he is your dependent.
    You can and should claim the tuition credit before claiming the 529 plan earnings exclusion. The educational expenses he claims for the 1099-Q should be reduced by the amount of educational expenses you claim for the credit.
    But be aware, you can not double dip. You cannot count the same tuition money, for the tuition credit,  that gets him an exclusion from the taxability of the earnings (interest) on the QTP. Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion. Another special rule allows you to claim the tuition credit even though it was "his" money that paid the tuition.
    In addition, there is another rule that say the penalty is waived if he was unable to cover the withdrawal with educational expenses either because he got scholarships or the expenses were used (by him or the parents) to claim the credits. He'll have to pay tax on the earning, at his lower tax rate (not yours), but not the penalty.

    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.
    For 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
    Box 2 is $600
    3000/5000=60% of the earnings are tax free
    60%x600= $360
    You have $240 of taxable income (600-360)

    In your case:
      -$2700 in educational expenses(including room & board)
       -$1130 paid by tax free scholarship
       -1570 used to claim the American Opportunity credit
     =    $0 Can be used against the 1099-Q

    Box 1 of the 1099-Q is $2600
    Box 2 is $520
    0/2600=60% of the earnings are tax free
    0% x 520 = 0 is tax free
    You (or more likely your daughter) have $520 of taxable income (520-0)
    • Just to clarify... the QTP paid for tuition, the scholarship went into a seperate acct - not used for living expenses.
      My daughter will claim the 1099-Q which is the Florida Prepaid QTP.
      I can claim the 1098-T even thought it has her name & SS#, because she's my dependent.
      We spent 600 on books. can it be deducted from the scholarship $ on her tax return or do I claim it on mine along with the American Opportunity credit?

      Please clarify this sentence..  Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion
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