A couple of DS’s options for next year have “full tuition” scholarships. I got some help from @mom2collegekids to understand that the QHEE (qualified higher education expenses) include a few fees more than just tuition, and it’s my understanding (please correct me if I’m wrong!) that room & board are generally NOT QHEE.
So then there’s also the issue that if possible, a middle-class family would want to pay some amount (is it $4000?) from non-529 sources before going to the 529, to take some federal tax credits, but I don’t understand those amounts or what the income phase-outs would be. Can someone help me with that?
And then figuring out how much QHEE is left to take from the 529 seems a bit confusing.
Obviously if DS goes to a place where we’re paying an arm and a leg for tuition, there’s “plenty” to pay to go around and it will be easy to make sure all the 529 deduction goes to QHEE. But if it’s only fees, I think it’s a narrower set of constraints.
My D’s scholarship covers just tuition, but increases with tuition increases.
The fees for her school last year were comprised of about $900 of mandatory fees every student pays, then about $200 more of lab fees for bio and chem. I was surprised however when the 1098T from the college arrived that listed the tuition and fees billed and scholarships received. The fees were lower on the form because even though the transportation fee and health fee were mandatory fees they were not qualified education expenses.
I think the phase out income is $80,000 single or $160,000 married filing jointly, that’s MAGI for AOTC.
$4,000 of adjusted QEE results in up to $2500 tax credit. Up to 40% or $1000 is refundable.
The first $2000 gets 100% of credit, the next $2,000 only 25%
If your D has full tuition then you could claim books and fees for AOTC and pay room and board from the 529 money.
Yes scholarships that cover room and board are taxable. QEE is tuition, qualified fees, required course supplies like goggles, and books when figuring tax free treatment of scholarships and AOTC.
We ended up having about $1300 in books and fees and got a $1300 AOTC. Not a full credit but we are not complaining about the full tuition.
Received this last month from child’s 529 plan: “On December 18, 2015, President Obama signed a bill into law that included several enhancements to 529 College Savings Plans. These enhancements benefit your investment in your child’s college education. Computer technology and equipment are now allowed as a qualified higher education expense. The purchase of a computer, equipment, software, internet access and related services…while enrolled in an eligible education institution.”