I have never had anyone use 529 money to pay grad school expenses. For AOC, to figure out what part of the income from 1099-Q is taxable you have to reduce the qualified education expenses by the amount used for the credit which is usually $4,000. Am I correct in assuming that when LLC is involved the amount that has to be subtracted from the qualified expenses is whatever is used for the credit up to $10,000?
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Correct. No double dipping. :-) -
Or, you can allow the 529 money to be taxable to the student and take the full $10,000 for the credit. Work it out and see how it benefits your client best.Comment
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Just the earnings portion of the 529 money, of course.
Also, TTB 12-6, starting at bottom left. Don't forget that 529 distributions can also be applied to the room & board allowance set forth in the school's cost of attendance data if the student is at least half time in a degree program.
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"Just the earnings portion of the 529 money, of course" Well said BP.!Comment
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