QTP distribution

[oceanlovin'ea]

New situation for me. If I am reading TTB page 12-5, the amount of tuition paid must be reduced by the taxfree earnings from the QTP statement. For example, if client received $20,000.00 from the QTP and $5000.00 was interest earnings, you can only use $15,000.00 for the American Opportunity Credit. Is that correct?

Just want to make sure before I finish this return.

Thanks

Linda EA

[BP.]

No.

See Pub 970, p. 58 & TTB p. 12-6. Both sources have a formula to follow.

Figure qualified education expenses, deduct amount used to figure credit, then compare the resulting adjusted qualified education expenses to the QTP distribution to figure any taxable portion of QTP earnings. And remember, with a QTP, room & board qualify.