<p>The bottom line from all the info given in this thread by the OP is that all tuition, fees, books/supplies(I am surprised there are absolutely none) and room and board were covered by grants, scholarships and 529 funds. In another thread the OP did discover that there was already an excess distribution from the 529 in 2012. </p>
<p><a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/1444654-spending-down-529-before-getting-tax-credit.html[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/1444654-spending-down-529-before-getting-tax-credit.html</a></p>
<p>The only option available seems to be making the legitimate part of the 529 distribution taxable so as to take the AOC for that amount. But I don’t know how that would work in combination with the excess distribution which is taxable and I presume subject to the 10% penalty.</p>
<p>This thread has been very enlightening. My first child will be a freshman next year. From this post, I believe that the FA that my son receives for room and board will be taxable income to him? Am I correct?</p>
<p>Yes - scholarships/grants used to pay room and board are taxable.</p>
<p>I am so glad that I found this website. I wouldn’t even have realized that part of FA is taxable. My son is very fortunate to have a great FA package. Now we have to figure out how to pay the taxes on it. :)</p>
<p>Because there are scholarships involved, they can avoid the 10% penalty on the 529 distributions, up to the value of scholarships taken (this is to keep from penalizing a family that saved enough to cover expenses, and then got scholarships - it is not subject to penalty to the extent it is taken not used for qualified expenses due to scholarships). If there is enough in scholarships to cover the entire 529 distribution, then none of it is subject to the 10% penalty. It should be worth treating it as taxable in exchange for claiming the AOC.</p>
<p>momcat,</p>
<p>I’ll try to answer the questions but as annoying dad pointed out, I did overdraw on the 529 because I took out what I thought I’d need for most of the year. Be that as it may…</p>
<p>So, the f. aid package originally included loans and work study. However, MIT allows my son to bring in up to 6K worth of outside scholarships. For this year at least, that effectively wiped out both loans (3K) and work study (3K). I understand MIT will expect my son to contribute more each year, so those numbers will undoubtedly change.</p>
<p>Next, I looked over the document from NM-my son won a yearly corporate 6K scholarship from my dh’s company-and it doesn’t seem to say anything about how to designate the funds. MIT, of course, applied it towards the billed amounts of tuition, room, and board (and fees), and then billed us what wasn’t covered.</p>
<p>My son truly had no book costs in the fall. He bought himself a computer with his own money and he had no code fees. I’ve looked up the cost of his texts for the spring (used books, all, I think) and it will be between $100 and $200, I think.</p>
<p>I’ll have to ask my son about any special fees or equipment I might not know about. He didn’t tell me, at any rate.</p>
<p>And believe it or not, no early housing deposit or tuition deposit. They made it real easy!!</p>
<p>CTScoutmom,</p>
<p>It sounds like we can avoid the 10% penalty because the scholarship is more than the amount I overdrew. (I overdrew by $1147, I believe)</p>
<p>And Carebear, if you can figure this out for us, you’ve got cyber thanks all day long!! If we can get through this year’s numbers and even have a small understanding, it will certainly help us in subsequent years when the small 529 account will be depleted and we will be scrambling to come up with costs since I know MIT expects more from families and students each year. (Though if my son can find a good summer job, that will help but also make things more complicated, er, interesting!)</p>
<p>(very late chiming in)…very informative…thank you all</p>