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xu3
December 26, 2024
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if I choose to include part of tax free grant in student income and claim AOTC, should I reduce my 529 AQEE with this amount?

  • December 26, 2024
  • 1 reply
  • 0 views

my student has tuition and fee + books=9155,

total tax free grants scholarship=7948,

room and board +laptop =8433

student loan=2227

9155-7948=1207 can be used for AOTC,

AQEE for 529 =8433, so I can withraw 8433 tax free from my 529.

 

if I include $2793 grant scholarship in student gross income, then, I can get $4k expenses to claim AOTC,

Is my 529 AQEE still 8433 or will be reduced to 8433-2793=5640?

Best answer by Hal_Al

Q. If I include $2793 grant scholarship in student gross income, then, can I get $4k expenses to claim AOTC?

A. Yes.  That's exactly how the scholarship as income loophole works.

 

Q. Is my 529 AQEE still 8433?

A. Yes.

 

Q. Or will be reduced to 8433-2793=5640?

A. No.  The tax free scholarship amount of $2793 shifted to taxable scholarship. $2793 of expenses shifted (from being allocated to tax free  scholarship) to the AOTC.  Nothing happened to change the 529 AQEE. 

 

AOTC - American Opportunity Tax (Tuition) Credit

AQEE - Adjusted Qualified Educational Expenses 

1 reply

Hal_Al
Hal_AlAnswer
Employee
December 26, 2024

Q. If I include $2793 grant scholarship in student gross income, then, can I get $4k expenses to claim AOTC?

A. Yes.  That's exactly how the scholarship as income loophole works.

 

Q. Is my 529 AQEE still 8433?

A. Yes.

 

Q. Or will be reduced to 8433-2793=5640?

A. No.  The tax free scholarship amount of $2793 shifted to taxable scholarship. $2793 of expenses shifted (from being allocated to tax free  scholarship) to the AOTC.  Nothing happened to change the 529 AQEE. 

 

AOTC - American Opportunity Tax (Tuition) Credit

AQEE - Adjusted Qualified Educational Expenses 

    X
    xu3Author
    December 26, 2024

    thanks a lot!

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