<p>Qualified education expenses were $8000 (Tuition/Fees: 4000 (4200 -200 health fee), Books 500, Computer 2500 (laptop is required of all students. Purchased from school but was not the cheapest option)).</p>
<p>Scholarships were 7100 (2800 Pell, 750 SEOP, 1250 scholarship, 2300 school grant)</p>
<p>529 expenses were 5500 (4600 room and board, 200 health fee, 700 health insurance (required if uninsured))</p>
<p>My questions are:</p>
<p>1) Am I correct that the scholarships are tax free since the qualified expenses exceed the scholarships?</p>
<p>2) Can I withdrawn 7100 from my 529 plan tax free due to scholarships? Will the interest portion be taxable?</p>
<p>3) Can I also withdraw 5500 from my 529 plan for the 529 expenses?</p>
<p>4) If my daughter claims 4000 of the scholarships as taxable, then can I use the 4000 for the AOC? Will the 4000 effect her FA for next year?</p>
<p>1) Yes, the scholarships of $7100 will be tax free.
2) The earning portion of the 529 distribution of $7100 will be taxable. No 10% penalty due to the tax-free scholarships of $7100.
3) Only $4600 room and board is 529 qualified expenses, so you can only withdraw $4600 from your 529.
4) If your daughter claimed $4000 as taxable scholarship, you could claim this $4000 for AOTC and it (taxable scholarships) will not impact your daughter’s next year Federal financial aid.</p>
<p>If I take a 529 distribution, the earnings portion is taxable income to me (the father) if the check is in my name or it can be distributed to my daughter which would then be considered as income to her. Correct? depending on the amount of earnings, I assume this could impact next years FA.</p>
<p>Are the definitions of scholarships the same for 529 plans as the AOTC? In other words, are all the scholarships I listed considered scholarships for the 529 plan? I know that qualified expenses are defined differently.</p>
<p>Why are you subtracting the health fee from tuition and fees? If that’s a fee required of all students to support the student health center for example, it’s a QEE for the AOC and for the scholarships not being taxable.</p>
<p>I’d be careful with that computer purchase. You need good doc saying it’s required of all students. Also, $2500 seems extremely extreme. People on this board have in the past posted about receiving inquiries from the IRS about claimed education expenses. If your ducks are in a row it’s easily taken care of. Since purchased from the school, see if the cost is included on the 1098T.</p>
<p>As for who reports distribution earnings as income if needed, see who gets the 1099Q in January. Usually the student receives it.</p>
<p>I don’t think the health insurance is QEE for 529 distributions.</p>
<p>Qualified education expenses do not include
paid for:</p>
<p>Insurance,
Medical expenses (including student health fees),
Room and board,
Transportation, or
Similar personal, living, or family expenses.</p>
<p>This is true even if the amount must be paid to the
tion as a condition of enrollment or attendance."</p>
<p>As for the 529, I am still tryimg to figure that out.</p>
<p>Yes the computer was extreme. My daughter’s school which requires all students to have a laptop sold laptops that ranged from $1200-2700. I paid the school store directly so it will probably not show up on the 1098T. It is also not listed in COA.</p>
<p>If I take a 529 distribution for the scholarships in my name where do I report the taxable earnings? Pub 970 says on form 1040 or 1040NR. Can I still use the 1040A tax form?</p>
<p>If I only take qualify distributions and not for the scholarships can I use the 1040A?</p>
<p>My school requires spring tuition to be paid in Dec. Can I use that tuition for the following year’s AOTC or must I claim it in the year paid?</p>
<p>I believe the expense must be paid in the tax year in question. So if you paid tuition in Dec, 2013, you could use that expense towards 2013 taxes.</p>
<p>When I enter data into TurboTax, it appears that if I have a taxable distribution from a 529 plan that I am required to use the 1040 form instead of the 1040A. Is this true?</p>
<p>If I take a distribution based on the scholarships is the earned income reported on my (the parent and owner of the 529) or on my daughter’s return? You indicated that it is on the student’s return but is that the case if I receive the distribution? My concern in future years the distribution could effect her FA.</p>
<p>NONAME87…keep this in mind…it might apply… some parents don’t take withdrawals from the 529 until after junior year to avoid any hit or hits…or they roll it over to another kid. Timing for anything is key. Taxable income will be only the part that you withdrawal that doesn’t qualify… Some CSS colleges will hit you for this and some don’t…Only take taxable 529 funds up to the amount you wont ruin your efc for that particular school.</p>
<p>If you send the money from the 529 to the school which is a mistake in my opinion the 529 plan administrator usually report it as kids/beneficiary 1099q social. You can always change the owner and beneficiary before any withdrawal, but could cost in cd penalties etc…and planning for any non taxable qualified distribution. 1099q and whose name is on the distribution check is who reports it i believe with IRS.</p>
<p>but for example a wife takes the withdrawal into her name as the owner its on her taxes, but you would need to file your child on your return as a depedant. You can direct who the check goes to call your 529 plan and confirm. Also UTMA 529’s are completely different rules about changing owners and directing checks…so see how the names, how its setup appear on the 529 account…</p>
<p>As for the computer…I would take it until the IRS says different…how can the kids do internet, take notes in class or email without a computer? Shame on the IRS for not allowing it. Its getting to the point where 529’s are only good for tax shelters of the rich and offer zero help with college. </p>
<p>Also, having step parents, or divorced parents, can help or complicate the matter. Need to understand your goal, your efc such as taking all the funds out or protecting efc etc…</p>
<p>Remember your base year (1st year) is your most important year for college aid.</p>
<p>I believe that the computer is allowed for the AOTC since my daughter’s school requires that all students have a laptop and they had to meet certain specs. The computer was purchased from the school. I would assume that this would be considered required equipment for enrollment.</p>
<p>I believe the 529 plan was changed to allow computers, programs (required) and internet access cost to be an allowed expense.</p>
<p>Computers were an allowable 529 expense for everyone…don’t exactly remember, but I think it was 2009-2010. Since then computers are allowable only if required by the school, or by the specific major/curriculum.</p>
<p>Am I correct that the computer is a qualified expense for the AOTC since it is required?</p>
<p>Jeannemar: Because of the scholarships, we will not need all of the 529 plan funds. If we don’t take the withdrawals to match the scholarships, we will have to pay a 10% penalty on the earnings in the future.</p>
<p>To qualify for the AOTC, my daughter will declare part of her scholarship to be taxable. Not sure yet how to properly do that yet.</p>