<p>I wish I have read this thread before I withdraw my D’s 529. Not being familiar with the system and 529 “trick”, I covered this fall tuition+fee and housing mostly by 529, leaving <$2000 out of pocket. Of course, I did not ware that I need to pay $4000 (not from 529) in order to claim the AOTC. Now, if I pay additional money (not from 529) into the U’s account, making the total amount (grant+loan+529+my deposit) exceed the Fall balance, will that make me eligible for the AOTC? I am not sure if the U will refund the excess back to me. Or if you see another other way I can claim the AOTC, please share. BTW, I withdraw the 529 on Friday, I will try to see if I can stop / amend it on coming Monday, but hope is not high, I guess. Thanks.</p>
<p>You don’t have to have $4000 to claim the AOTC, that’s just the amount that will get you the max AOTC. If you send extra money to the school, it really wouldn’t be for QEE, just extra for some unknown reason. They would probably refund it.</p>
<p>You may be able to have your student report the earnings portion of the amount of the distribution it takes to get to $4000 as taxable income to the student. Let’s say so far you have $1900 for the AOTC. Your student could report the earnings portion of $2100 of the 529 distribution as taxable income. Depending on your student’s other income, s/he may not have to even file or may not owe any or much tax. Then you could use the $2100 for the AOTC. Read Figuring the Taxable Portion of a Distribution and especially example 2 on page 53 of IRS Pub 970:</p>
<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
<p>I did this with my daughter for 2012. It does involve the student filing form 5329 which shows that no additonal tax/penalty is due because the reason for declaring the taxable income is so the parent can take the AOTC. Form 5329 and thus the student’s return can only be paper filed.</p>
<p>You can pay your Spring 2014 bill in December of 2013, if that would be advantageous to maximize your tax credit. </p>
<p>The AO tax credit is authorized through the end of 2017, so I’d try to make sure you have qualified expenses for next year’s tax credit too.</p>
<p>Charlieschm and Annonyingdad, thanks for the advice. Fortunately, I am able to stop the check and reduce the withdrawn amount. So I think I am good for the tax credit.</p>
<p>Thanks to all of you for posting. Your answers have been so helpful. I didn’t realize that the last $500 tax credit was based on the last $2000 expenses. That’s great to know now and maybe other families will benefit by not stretching that last $2000 for the $500. It makes a great deal of difference for us. </p>
<p>Glad things worked out for you Dad4life. I guess when tax time comes, we’ll be back here getting more great advice.</p>
<p>Charlieschm, please keep us up to date if you hear any more news about the laptop computers/software expenses, thanks!</p>