AOC and 529 coordination of QEE and taxable scholarships.


C

collegedad

My daughter is in college and I am trying to determine what I can take out of
her 529 plan:

Scholarship: 2500
School grant: 4000
Pell: 5500
Total scholarships: 12000

Tuition, fees, books: 8000

Room and Board: 11000

The options I am considering:

1) Taxable scholarship amount is 4000.
529 QEE: 11000
AOC QEE=0

2) Declaring additional 2000 as taxable on my daughter's return.
Taxable scholarship amount is 6000.
529 QEE: 11000
AOC QEE=2000

Do I understand Pub 870 correctly that the 529 QEE is NOT reduced
by the taxable amount of her scholarship. So declaring an additional
2000 as taxable income has no impact on the expenses claimed for the
529 distribution nor does the original require 4000 taxable amount.

Note: The scholarship and school grant can be used for any expense
included in the COA. It is not restricted.


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