Each should do their taxes both ways and see which way the family comes out best. You two have to agree on who is going to claim his exemption. The real question is who should be claiming him in this "transition" year to adulthood. If he/she was a student (under 24) for at least 5 months and lived with you for more than half the year, and did not provide more than 1/2 his own support for the whole year, you can still claim him.
#529 QUALIFIED EXPENSES IRS PLUS#
You have $240 of taxable income (600-360) plus $24 (10%) penaltyĪs to being a dependent in his Graduation year: =$3000 Can be used against the 1099-Q (usually on the student’s return)ģ000/5000=60% of the earnings are tax free $4000 used to claim the American Opportunity credit $10,000 in educational expenses(including room & board) Total qualified expenses (including room & board) less amounts paid by scholarship less amounts used to claim the Tuition credit equals the amount you can use to claim the earnings exclusion on the 1099-Q. Furthermore, the entire distribution must match the scholarship amounts, not just the earnings portion.
That is, you cannot count the scholarship amounts prior to 2020 to offset the penalty. In order to use the scholarship exception to the 10% penalty, the scholarship must have paid for tuition and other expenses in the same year as the 529 plan distribution.
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